PROMOTING SUSTAINABLE INVESTMENT THROUGH A STOCK EXCHANGE SUSTAINABILITY INDEX IN MEFMI COUNTRIES

By Farai Masendu
April 2015
This conceptual paper proposes the application of Sustainability Index (SI) on stock exchanges within MEFMI member countries as a way of fostering sustainable (responsible) investment which is critical for promoting sustainable development. All the MEFMI countries have stock exchanges, which although relatively small in size, have the potential to attract significant international capital flows. With some of these countries largely endowed with mineral resources, there is increased scope for investment into the mining and related sectors. The question that arises is the extent to which this anticipated investment can be effectively harnessed for development in these counties.

This paper recognises the critical role that investment promotion institutions such as stock exchanges can play in promoting responsible investment. This paper is therefore, motivated by the need to design practical ways of orienting stock exchanges in the MEFMI region towards mobilising international capital that contributes towards sustainable development. Currently, none of the MEFMI exchanges has fully integrated sustainability and the sustainability index in their activities. The stock exchange sustainability index proposed in this paper, raises prospects for sustainable investment in the region as investors are compelled to integrate environmental, social and governance (ESG) issues in their long term decision making processes when investing towards.

This paper draws from the work of the United Nations Sustainable Stock Exchange initiative, the United Nations-supported Principles for Responsible Investment (UNPRI) as well as practices of jurisdictions which have since implemented stock exchange sustainability indexes to help track responsible investment towards sustainable development.