Sustainable Trading Network Seeks to Drive ESG Change Across Financial Markets
Posted by Colin Lambert. Last updated: February 22, 2022
A new non-profit membership network, Sustainable Trading, has launched today (February 22), with 30 founding members from the asset management, banking, brokerage, exchange and technology sectors. The new network is dedicated to transforming environmental, social and governance (ESG) practices within the financial markets trading industry.
Sustainable Trading was founded, and will be led by, Duncan Higgins, former head of electronic products EMEA at Virtu Financial and ITG. It will bring firms together to devise practical solutions to industry specific ESG issues and develop a mechanism for self-assessment and benchmarking.
Members will also consider the environmental impact of how the financial trading industry builds, maintains, and operates trading infrastructure along with a focus on areas such as diversity, equity and inclusion, employee wellbeing, engagement with communities and a stakeholder-oriented approach to enterprise governance, the network says.
Sustainable Trading says its initiative is different to others in the industry – of which there are several – because it will focus on the trading environment and operations, as opposed to the financing of, or investment in, green initiatives. “Where other initiatives focus on investment activities ST will focus on trading. ST will enable firms to make substantive and practical progress and implement improved practices that will make trading more sustainable,” Sustainable Trading says.
Membership is open to participants within financial services engaged in trading or providing trading-related services. Drawn from across the industry, the founding members include: Aegon Asset Management, AllianceBernstein, ArchES, AXA Investment Managers, Bank of America, big xyt, BMLL Technologies, BMO Capital Markets, BTIG, Credit Suisse, Equinix, Euronext, Federated Hermes, Instinet, Invesco, Investec, Jefferies, Liberum, Liontrust, London Stock Exchange Group, M&G, Neovest, Ninety One, Options Technology, Outset Global, Redburn, Russell Investments, State Street Global Advisors, T. Rowe Price and Union Investment.
“The financial system has tremendous capabilities to lead its own transition to a more sustainable future,” says HIggins. “Sustainable Trading will mobilise members around a practical approach to setting and achieving their ESG goals and establish grassroots champions of change.
“Working together we can create a robust, sustainable industry for the future; one where the principles of good environmental, social and governance practices are woven throughout our daily lives.”
The new initiative will develop sets of ESG best practice specific to certain trading services which, when followed, it says will result in ESG improvements to the operation of the service. Broad adoption and implementation of the best practices by the industry will result in significant improvements to the trading ecosystem, it adds, noting that firms will be able to benchmark themselves against the best practices.
These benchmarking activities can generate scores for a firm’s service for each of E, S, and G along with an overall sustainability result. “By implementing more of the best practices, they will be able to improve the sustainability of their offering and increase their ESG scores,” Sustainable Trading says. “Best practice benchmarking will also allow firms to compare their own sustainability and ESG scores against the rest of the market.”
It adds, that more detailed market comparison and analysis services may also be offered to members. As benchmarking is against standardised best practices, providers will be able to efficiently communicate with clients and demonstrate their commitment to increasing sustainability in the trading ecosystem. “With sustainability an increasingly important topic for clients, being able to demonstrate the contribution of a provider to sustainable trading will be increasingly important,” it states.
“Firms in the trading industry have incredible expertise within their businesses,” the network says. “ST will organise and support specialist working groups that bring motivated experts together to discuss specific topics. Through these collaboration opportunities the groups will identify ESG challenges, inefficiencies and, most importantly, practical ways in which firms can improve. These practical improvement opportunities will then be incorporated within a set of best practices for a particular service.”
When looking at trading infrastructure, Sustainable Trading will focus on how the industry build and maintains it, in particular, data centre footprint, power consumption, cooling requirements and technology practices leading to carbon emissions and resource use. “We seek to make environmental impact a key part of the decision-making framework, on a par with functionality, performance and cost,” it states.
It cites the example of trading servers, which are often configured for maximum performance. In practise, the network says, this means setting up the trading server so that it runs at full power regardless of the load being processed. Further, to avoid switching between ready and idle states, servers may be set to operate at full power for 24 hours each day. So, for a trading day that could be 6 1/2 or 8 1/2 hours long, systems are running at full power for three-four times longer than the markets are open. “It should be very possible to reduce this waste by bringing user firms, hardware manufacturers and data centre operators together to identify more efficient approaches,” ST says.
A series of working groups are envisaged, which will cover a wide range of topics. These could range, Sustainable Trading says, from a working group on business practices such as including the energy efficiency of the offering within marketing materials or charging different tariffs to encourage greater efficiency.
It adds another group may cover how to improve inclusion in a trading business, the required granularity of reporting on diversity and how to measure the contribution of a business unit to developing social inclusion and the broader involvement of the business within the community. Technical working groups covering topics such as trading software, hardware and the use of cloud are expected to identify significant opportunities to reduce energy consumption.
“We are delighted to be a founder member of the Sustainable Trading network, and to be part of a driving force for ESG change within and across the global trading community,” says Christoph Hock, head of multi-asset trading, Union Investment – one of a large number of firms to release statements of support. “As a thought leader in an ever-changing market landscape, we are already focused on the sustainability of internal operations and external supply chains. As an active participant in the cross-industry Sustainable Trading initiative, we hope to accelerate the pace of ESG change for the benefit of the wider trading community and influence ESG best practices for the benefit of all financial market participants.”