No one person or business has all the answers. However, we believe that the stock exchange, as a place that aggregates the consensus view of diverse actors and discovers the price of a company’s shares based on its value to all stakeholders, can provide some of the answers, given the right conditions.
Firstly, we need to improve information flow. Data on company performance based on classical metrics are vital, but getting trusted data on the societal impact of corporates is harder. We will need to open access to alternative data collected across different media, and establish rules and policies on its dissemination and use.
At HKEX we want to make it easier for investors to assess and compare ESG performance in any given financial product so we are launching the Sustainable & Green Exchange (STAGE), an online portal that provides access to sustainable financing information, education and research material.
Secondly, we must continue to promote clarity and transparency from corporate executives in how they evaluate their ESG obligations, risks and business impact. HKEX has raised the requirements on the boards of listed companies in this sense, but investors will increasingly demand even greater standards for the reporting of social considerations and how they align with what investors and policy makers expect and require.
Thirdly, the relationship between corporations and their end customers’ needs to become much more personal. Trust will be built when we see the human face behind the brands we use on a daily basis. There will be increasing pressures on institutional fund managers to seek investments that promote the best interests of the retail investor communities they represent. Equity finance may become much more equitable with less opportunity to hide behind opaque corporate veils and commingled fund structures, producing more benefits for shareholder communities.
Finally, we will increasingly struggle with questions over the benefits and costs of globalisation, and what companies should do when the right thing in place may conflict with the good in another. Society, using the market, has the power to guide us to an answer.
Our Role
Policymakers will face difficult decisions over the coming years on how to best work together as a global community. Gateway markets, such as HKEX, have unique roles to play in helping all stakeholders gain timely access to information and navigate the complex cultural differences between communities.
Done right, the differences between private and public equity should become even starker. Companies will increasingly choose to list in the public arena not only to raise capital at lower cost, but also to demonstrate their commitment to contributing to society.
As HKEX looks ahead to the next 20 years as a listed company, we can see that our core function will not change. HKEX will still be the best place for all stakeholders to meet and transact as they establish the fair value of a company. However, what society deems to be fair is changing, and HKEX is at the centre of that change. Adam Smith would be proud.