Putting capital markets into stakeholder capitalism

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Laura M. Cha, Chairman, Hong Kong Exchanges and Clearing (HKEX)

  • Capital markets have a key role to play in building a more equitable and environmentally sustainable economic system.
  • ESG assets under management reached $35 trillion in 2020 and are forecast to exceed $50 trillion in 2025.
  • Capital markets must facilitate and promote transparent and reliable ESG disclosure to prevent greenwashing from stalling the global transition to a low-carbon economy.

As we build our way out of the COVID-19 pandemic, the world is working together to make a more resilient and sustainable global economy. At a national level, we see initiatives like “Build Back Better” and “Levelling Up”, while COP26 has united the world around goals on such things as halting deforestation, phasing out coal power and reaching net zero by 2030.

Looking at net zero in particular, the investment required to achieve it – estimated at $125 trillion by 2050 – can’t come from governments alone. Public and private sectors must work together to drive immediate global climate action, and the world is also calling for a more equitable and environmentally sustainable economic system. This is where capital markets have a key role to play.

Capital is mobilising

As we look at both issuers and investors, I’m encouraged to see the rise in ‘stakeholder capitalism’ and the investors mobilising around the net-zero transition.

Companies are increasingly conscious that they must serve the interests of all stakeholders. They are linking long-term business success with their customers, employees, suppliers and communities at large, and are acknowledging that their commercial viability must co-exist with the environment they operate in.

Global investors, both big and small, are championing environmental footprints over excess profits, social impact over short-term performance, and governance over growth-at-all-costs. In a MSCI survey of 200 institutional investors managing around $18 trillion, 73% planned to increase environmental, social and governance (ESG) investment in 2021. In an alternate October 2021 survey of 800 individual US investors by Morgan Stanley, 79% were focused on sustainable investing.

As such, flows are rising, with ESG assets under management growing from $30.6 trillion to $35 trillion in 2020, according to Bloomberg estimates, and forecast to exceed $50 trillion in 2025.

Capital markets must take the lead

As this momentum builds, capital markets have a crucial role to play in shaping the low-carbon, climate-resilient economic transition. Practitioners know that we must take the lead and turn investment flows into far-reaching, fundamental change.

Capital markets already have a strong track record as engines of innovation – just look at the progress that the electric vehicle (EV) and solar energy industries have made in a relatively short time.

Capital raisings have fired the investments that have made core technologies cost-competitive, to the extent that EVs now amount to eight out of every 10 new cars sold in Norway and solar energy is at, or close, to cost parity with electricity grids in many countries around the world.

Image: International Renewable Energy Agency, 2021

How can we go further? By creating a vibrant, deep and liquid sustainable finance ecosystem to connect investors and issuers to facilitate the capital flows needed to fund research, scale ideas and propel the low-carbon transition.

That will require a robust range of sustainable finance products. Recent progress toward growing the green, social and sustainable (GSS) bond asset class are a great example of what can be achieved, with a record $227.8 billion raised globally in the first half of 2021. Much more can be done across other asset classes too, such as ETFS, REITs and derivatives, and we must step up to broaden our product horizons.

Image: Bloomberg, January 2021

Most importantly, capital markets must also facilitate and promote transparent and reliable ESG disclosure to prevent greenwashing from stalling the global transition to a low-carbon economy. Here, cross-border collaboration between issuers, investors, exchanges and regulators is essential to create the uniform ESG rules, or taxonomy, needed to govern the green and sustainable financial ecosystem.

We must also recognize that issuers in the capital markets are at different stages on the road to their net-zero transition. Here the role of education is particularly important for companies that do not have expertise on ESG or climate-related issues, and who must meet mandatory disclosures required by the Task Force on Climate-Related Financial Disclosures by 2025.

At HKEX, we see ourselves as a change agent in global markets with a key role to play in providing the framework, guidance, resources and support needed to help our stakeholders accelerate the adoption of green and sustainable business plans, prioritise the development of industries that support a post-fossil fuels future, and set our ambitious climate action plans in motion.

This is what world needs right now: but unity is the first step – so join us as we chart the course for a better world and help put the ‘capital’ into stakeholder capitalism.


  1. A common yet questionable refrain STILL prevails among ‘free-market’ capitalist nation governments and corporate circles: Best business practices, including what’s best for consumers, are best decided by business decision-makers.

    This was proven false when long-term care-homes put profit maximisation before their residents’ well-being, neglect that resulted in needlessly numerous COVID-19 senior-citizen deaths. … It was proven false with Facebook prioritising the expansion of its already huge profit margin over the health of its younger users. … And proven most false when the pharmaceutical industry knowingly pushed its new, very addictive opiate painkiller.

    It’s the immoral nature of the Big Business beast. Western business mentality and, by extension, collective society allow the well-being of human beings to be decided by corporate profit-margin measures. And our governments mostly dare not intervene, perhaps because they fear being labelled anti-business by our avidly capitalist culture.

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