Global exchanges are seeing increase in green and sustainable products in efforts to rebuild the economy amidst the COVID-19 pandemic. This was highlighted during the Capital Markets in a Pandemic webinar hosted by The Nigerian Stock Exchange (NSE) on Wednesday.
The event featured a panel discussion headlined by the Chief Executive Office, NSE, Mr. Oscar Onyema, CEO, World Federation of Exchanges (WFE), Ms. Nandini Sukumar; CEO, London Stock Exchange (LSE), Mr. Nikhil Rathi; and CEO, Luxembourg Stock Exchange (LuxSE), Robert Scharfe; and moderated by CNN correspondent, Eleni Giokos.
The speakers discussed topical issues such as the digitization of stock exchanges, emerging asset classes, market liquidity and the critical role of exchanges in supporting their economies, especially during a crisis.
Speaking to the importance of business innovation amidst the COVID-19 pandemic, CEO, NSE, Onyema noted that, “At the brink of the crisis, we received requests from investors seeking clarification on The Exchange’s business continuity plans and our ability to keep the market open.
“This was clarified early enough as details of our robust response to COVID-19 was communicated to all stakeholders and we have enjoyed seamless remote operations since.
“This is, however, possible because of our commitment to digital transformation which began several years ago and continues to evolve with today’s emerging trends.”
The NSE has certainly reaped the rewards of these investments as the Nigerian capital market continues to enjoy market activity, liquidity and new listings.
Onyema highlighted some of the positive results recorded including the growth in returns in the equities market with the NSE All Share Index returning month on month gains of 8.1% and 9.8% at the end of April and May 2020 respectively; increased participation of domestic investors in the capital market; strong performance in the fixed income market; and impressive returns in alternative investments such as the Newgold ETF. Furthermore, the NSE has recorded over N218 Billion in corporate and government bonds even during the pandemic.
In light of the changing business environment, the panellists went further to address some of the changes the pandemic has triggered in economies and capital markets. One of such is the noticeable shift in attention to social bonds and ESG related issues across asset classes. CEO, LuxSe, Mr. Scharfe noted, “Over the last few months, we have seen the green bond market shift quickly towards social bonds. We have seen over $20 Billion raised in response to COVID-19. This is an indication that investors are interested in these types of investments and I think this is just the beginning of the shift for shift ESG investments from a niche asset to the mainstream.”
Mr. Onyema shed some light on the activities of the NSE in this regard, stating that, “At the Exchange, we have a robust sustainability agenda. While we have focused on the “G” in ESG, creating governance based indices and heightened awareness on governance imperatives, we have also worked with several stakeholders to address the “E” by creating green bonds in support of projects with strong climate credentials. The COVID-19 pandemic is now forcing us to set our sights on Social Bonds as a way of raising capital to support new or existing projects with positive social outcomes.”
Further efforts were highlighted by CEO, LSE, Rathi who stated, “We anticipate a change in the nature of investing with ESG considerations featuring across asset classes. The LSE is, therefore, excited over our foresight in building a dedicated Green Bond Segment and introducing a green economy classification for equities. In fact, our first listing for the year was a green energy company. It will, therefore, be interesting to see how this plays out over the next ten or so years even as issuers respond to investors’ demands to build a better world.”
Looking ahead, the panel discussants reiterated the critical position of exchanges in supporting economies which can be encapsulated in CEO, WFE, Ms. Sukumar’s words, “The focus today is on rebuilding the economy. Exchanges have made the requisite investments to keep markets open and maintain fair and orderly markets during this pandemic. They will remain fundamental to capital market stakeholders who require access to capital to build, grow and develop the various sectors of the economy.” She went on to express her delight over the NSE’s efforts in operating an efficient and transparent market, commend the NSE for promoting sustainable finance in West Africa, and also recognise Mr. Onyema on the thought leadership displayed in convening the webinar.
The event – which had over 350 participants in attendance – proved to be rather timely in addressing topical issues around the vulnerability and unique opportunities that the COVID-19 pandemic has created and how they are being – and will continue to be – addressed by stock exchanges.
In closing the event, the National Council President, NSE, Otunba Abimbola Ogubanjo stated, “Today, we have highlighted some of the steps that we can expect to see in the near future including the development of alternative and sustainable asset classes; dependence on technology and digital innovation; commitment to customer centricity; and drive for collaboration across regions. With these, capital market players can rest assured that exchanges will continue to execute on their mandate to deliver a platform to raise and access capital even during a crisis. Certainly, we are living in unprecedented times but from what we have heard, I believe that we can all leave with the confidence that there is a lot to look forward to in this ‘new normal’.”