Nasdaq 2022 Sustainability Report: Supporting the Investment Community
ESG Indexes
The OMX Stockholm 30 ESG Responsible Index (OMXS30ESG), introduced worldwide in June 2018, was the first ESG version of an established exchange benchmark. It was followed by the listing of ESG index futures contracts in November 2018. The OMXS30ESG is an ESG responsible version of the OMX Stockholm 30 Index, which is the leading share index on Nasdaq Stockholm. The OMXS30ESG is based on OMXS30, which consists of the 30 most traded securities on Nasdaq Stockholm, followed by a systematic criteria-based ESG screening where securities that fail the criteria are excluded. The OMXS30ESG Index is a market cap weighted index.
The liquidity of its constituents results in a highly suitable underlying benchmark for derivatives products. In addition, the OMXS30ESG is also designed to be used for structured products, such as warrants, index bonds options, exchange traded funds and other non-standardized derivatives products. The composition of the OMXS30ESG index is evaluated twice a year, at the beginning of January and July. In November 2021, Nasdaq expanded its ESG derivative offering with the listing of options based on the OMXS30ESG Index.
We manage dozens of indexes that integrate ESG criteria into the index methodology. We achieve this in a variety of ways, with some indexes designed purely as ESG and others designed with ESG criteria as an overlay to a broader investment thesis. The index with the largest tracking fund is the ISE Cyber Security Index.
Others include the OMX Helsinki 25 ESG Responsible Index, the OMX Copenhagen 25 ESG Responsible Index and the Nasdaq Future Global Sustainability Leaders Index. In 2021, we created ESG versions of two of our flagship indexes and now offer the Nasdaq 100 ESG Index and the Nasdaq Next Generation 100 ESG Index.
Green Equity Designations1
Nasdaq launched Green Equity Designations on the Nordic markets in 2021 in response to increased demand for sustainable investments and extensive growth in Nasdaq Sustainable Bond Markets. With issuers and investors searching for more green performance indicators on the equity market, Green Equity Designations aim to enable visibility and transparency for investors with two voluntary designations, Nasdaq Green Equity Designation and Nasdaq Green Equity Transition Designation. Through Green Equity Designations, Nasdaq can support environmentally sustainable companies or companies committed to transition to increase their visibility, transparency and credibility towards investors, business and other stakeholders.
The Nasdaq Green Equity Designation is currently available for companies on the Nasdaq Nordic stock exchanges. As the financial ecosystem anticipates upcoming sustainability and climate-related regulations, Nasdaq may see increasing interest in green equity classification from companies and investors outside the Nasdaq Nordic exchanges. In March 2023, the World Federation of Exchanges (WFE) launched its classification standard for Green Equity with reference to the existing model from Nasdaq’s Green Equity Designation, highlighting Green Equity Designation’s importance in helping investors assess companies that are generating revenue from products and services that contribute to positive environmental outcomes.
Nasdaq Sustainable Bond Network
The Nasdaq Sustainable Bond Network, launched in late 2019, is a global platform that aims to increase transparency for environmental, social and sustainable bonds. The Nasdaq Sustainable Bond Network connects issuers of sustainable bonds with investors, empowering them to evaluate impact and make informed investment decisions on sustainable bonds. The platform allows issuers of sustainable bonds to make their sustainable bond data more accessible to investors and other stakeholders. Investors can in turn use the platform to evaluate, track and create impact reports based on issuers’ ESG bond reporting. The database simplifies sustainable investing with an intuitive, easy-to- use solution that allows investors to discover, compile and compare sustainable bonds as well as generate impact reports. The platform also provides issuer-level information on UN Sustainable Development Goals allocation.
In 2022, we launched functionalities that report on the EU taxonomy alignment of projects financed by issuers’ green and sustainable bonds. Furthermore, we reached coverage of more than 1,500 issuers and 14,000 securities globally.
Investors in sustainable bonds are increasingly reporting on the impact of their investments and how their proceeds are allocated. We expect this trend to continue while seeing a larger incorporation of issuer-reported sustainable bond data in investment due diligence.
Total Number of Issuers and Bonds on the Nasdaq Sustainable Bond Network as of December 31
Issuers:
- 2022: 1,550
- 2021: 1,012
- 2020: 323
Bonds:
- 2022: 14,222
- 2021: 8,928
- 2020: 4,600
Nasdaq Sustainable Debt Market
The Nasdaq Sustainable Debt Market is comprised of dedicated segments for listing green, social, sustainability and sustainability-linked bonds, structured products and commercial papers.
Our sustainable debt markets are designed to highlight sustainable investment opportunities to investors with a green, social or sustainable investment agenda. It is open to all types of issuers that are looking to issue securities that meet our listing criteria, which are based on the green and social bond principles as well as the sustainability- linked bond principles, for which the International Capital Markets Association (ICMA) acts as a secretariat.
Number of Listings and Issuers on the Sustainable Debt Market as of December 31
Listings:
- 2022: 471
- 20211: 424
- 2020: 293
Issuers:
- 2022: 129
- 20211: 108
- 2020: 78
1 2021 and 2020 figures have been restated as a result of double-counting issuers with debt instruments on several markets and to account for all Nasdaq European exchanges.
Macro-economic factors had a negative effect on the Nordic debt markets in 2022 but sustainable debt markets continued to grow, emphasizing the increasing importance of sustainability throughout the financial markets. The number of sustainable debt instruments listed on Nasdaq grew by 11% during 2022 and the volume of listed bonds grew by 27%. The growth was mainly driven by new, large issuers joining the market (e.g., the inaugural Danish sovereign green bond listed on Nasdaq Copenhagen), as well as a wider adoption of sustainability-linked bonds in the Nordic region. Sustainability-linked bonds allow issuers that lack large capex but have set out ambitious sustainability targets to join the broader sustainable debt markets and can spur the overall markets’ growth in the coming years by allowing new sectors to participate.
ESG Data Hub
ESG Data Hub is a data solution offering investors and other stakeholders easy access to a wide range of comprehensive ESG data sets, accompanied by detailed product descriptions, selling points and use cases. The platform enables users to find data sets relevant to specific UN Sustainable Development Goals (SDGs) providing investors with visibility on the ESG impacts of their investments. Data sets within the product are wide ranging – they assist our customers with their own projects and the impact is at the customer level.
Demand for the data is driven by a customer move away from broad ratings and instead a move towards understanding in granular detail the different aspects of ESG. For many customers, ratings no longer give a representative picture of a company’s complete ESG picture. The move towards granular data sets started in 2022 and remains a growing segment.
In 2022, we added several new data sets to the product from third party providers. We also added our sustainable bond network data to the platform. For 2023, we continue to look for unique data partners to add to the solution, based on feedback and the needs of customers. We plan to integrate ESG data into our broader data marketplace, Nasdaq DataLink.
ESG Footprint
ESG Footprint is an easy-to-implement platform that measures the global sustainability effect of a portfolio and individual securities. Through an intuitive dashboard, investors and managers have access to the real-life effects of each investment, along with alternatives that may better suit an individual’s sustainability goals.
The tool gives investors insight into positive and negative flags for companies within their holdings depending on criteria set by the customer. We have seen growing demand for regulatory solutions, particularly SFDR and EU Taxonomy.
Within ESG Footprint, there are multiple datasets that provide insight into the
core impact of business and investment opportunities on SDGs. These datasets (SDG Signals, SDG Fundamentals, SDG CAPX) allow investors to evaluate companies’ alignment against the SDG framework.
In 2022, we added functionality that helps customers meet their SFDR requirements. In addition, we launched the product with a group of 20 banks in Denmark that are providing SFDR overlays for all their retail customers. In 2023, we continue to invest in the product and are looking to add an EU Taxonomy overlay while continually improving data quality.
Nasdaq Products and Services with Select ESG Features1
eVestment Diversity & Inclusion (D&I) and ESG Data in Asset Management
eVestment is a leading institutional investment database and analytics platform acquired by Nasdaq in 2017. To meet increasing demand for transparent and standardized D&I and ESG data from institutional stakeholders, eVestment launched multiple initiatives to provide a centralized resource in collaboration with consultants, asset managers, asset owners and key industry organizations. We partner with key industry parters to enhance the platform’s breadth of data.
1 Not categorized as ESG products and services for financial reporting.
D&I Data
eVestment began collecting D&I data in collaboration with the Institutional Investing Diversity Cooperative (IIDC) in 2021. The D&I questionnaire gives asset managers an opportunity to provide narrative commentary on their firms’ D&I initiatives and statistics. In partnership with FCLTGlobal and the Institutional Limited Partners Association (ILPA), eVestment also created a new diversity metrics template and data collection capabilities for its private markets reporting solutions in 2022. The data includes information on diversity metrics for investment company firm ownership, investment committee members and investment professionals, as well as aggregated diversity metrics for board and senior management of a fund’s portfolio companies.
ESG Data
In 2020, eVestment launched an ESG questionnaire to power robust investment research providing opportunity for asset managers to articulate their approach to ESG with compelling proof points. In 2022, the questionnaire was expanded with major enhancements to the proxy voting and engagement data designed to better understand process and outcome, add more questions around alignment (SDGs and SFDR) as well as introduce new climate sections at both the firm and the product level. To date, more than 50% of active products on eVestment are providing responses to the ESG questionnaire, while about 45% of firms are providing firm level information. Usage of eVestment’s ESG data has tripled since the 2020 questionnaire rewrite, reflecting not only the increased value of the data, but the increased importance of ESG data in the investing landscape.
