Evan Harvey is the Director of Corporate Responsibility for Nasdaq. He is responsible for gathering, analyzing, reporting and improving key metrics across the global organization, as well as managing investor and issuer company outreach on corporate sustainability topics, practices, and partnerships. Evan directs the research, analysis, and disclosure of all ESG reports, including the Global Reporting Initiative, Carbon Disclosure Project and the United Nations Global Compact Communication of Progress. Evan serves on the Board of Directors for the UNGC U.S. Network and chairs the Sustainability Working Group at the World Federation of Exchanges.
Christopher Skroupa: Why do stock exchanges care about the ESG performance of public companies?
Evan Harvey: Because we care about the performance of our markets. Nasdaq built its reputation, in part, on the value of transparency—and providing investors and other stakeholders with a better understanding of some key performance metrics makes markets better, more efficient, and more sustainable. As a listing venue, we do everything possible to support our listed companies, provide them with access to long-term capital and help them grow their business. As an SRO, we are also obligated to support the interests of many different market participants. Investors should have a complete picture of the long-term viability, health, and strategy of their intended targets. Environmental, social, and governance data is a part of that total picture. Informed investment decisions tend to produce longer-term investments.
Skroupa: What are the expected long-term results of action or inaction in this field?
Harvey: That depends on the amount of consensus that we can build. Imagine a world where the reporting expectations for public companies are essentially uniform. Every business is tracking and disclosing the same metrics in the same ways, using the same framework. The data has been assured or verified in some ways. It’s a world where the common language of corporate performance includes ESG just as readily as it does EBITDA and EPS. Then investors can truly make apples-to-apples comparisons. This could encourage longer holding periods and even cross-market participation. Companies built on bad strategy or short-term value will be exposed. The engagement between investors, regulators, and issuers would be much more substantive and meaningful. The range of indexes and other financial products would dramatically increase, because the niche data possibilities (and evaluative criteria) also increase. In short, you have markets with more transparency, more choice and more inclusion.
But now imagine the inverse: A smattering of ESG data, utterly lacking in uniformity or verification, creates more confusion than clarity for investors and regulators. Good companies are not rewarded for their transparency and do not attract the necessary investors to survive; bad companies stay in the shadows, undermining returns and eroding trust. Cross-border regulatory efforts create even more chaos, investment product choices contract, and markets become more unstable or more illiquid. And the downstream consequences of these dynamics grow ever more dire: environmental crisis, resource constraint, social and economic inequity.