Culture and climate shape ESG leadership in exchanges

July 21, 2025

Environmental, cultural and economic dynamics are playing a significant role in shaping the Environmental, Social, and Governance (ESG) strategies of stock exchanges around the world, according to new research by the World Federation of Exchanges (WFE).

The study, titled Drivers of Exchange Sustainability Development, draws on ten years of data from the WFE’s annual Sustainability Surveys. It was authored by Dr Kaitao Lin and Dr Ying Liu, both financial economists at the WFE. The research covers 66 exchanges across 54 jurisdictions, offering the first long-term analysis of the diverse influences on ESG policy implementation in capital markets.

A core insight from the study is the continued dominance of governance in ESG efforts, with 39% of ESG activities across exchanges focused on this pillar. This emphasis is particularly strong in countries with high literacy rates and low levels of corruption.

Over the past decade, sustainability concerns and reputational motivations have emerged as the leading reasons for ESG adoption among exchanges. While regulation has played an increasing role—especially since 2017—it still trails behind broader reputational and stakeholder-driven imperatives.

Investor demand is also shaping product innovation. The proportion of exchanges offering sustainability-linked financial products, such as green bonds, ESG ETFs, and sustainability indices, has jumped from 28% in 2014 to 86% in 2023.

Cultural and societal norms have also proven influential. Societies that value long-term planning over short-term gains tend to be more supportive of ESG innovation. On the other hand, risk-averse jurisdictions or those that value hierarchical or traditionally masculine traits may be slower to advance ESG frameworks—particularly in social and governance areas.

Environmental characteristics of a region also play a role in ESG development. The research finds that jurisdictions with dense forest cover and greater climate variability are more likely to create sustainability-related financial instruments.

WFE CEO Nandini Sukumar said, “We encourage policymakers and regulators to design targeted ESG frameworks that reflect national circumstances. In markets where ESG awareness remains low, public education campaigns, governance reforms, or incentives for sustainable financial practices could stimulate demand and strengthen market readiness. In more advanced or environmentally exposed economies, exchanges are leading sustainability product innovation and ESG data standardisation.”

WFE head of research Pedro Gurrola-Perez said, “For exchanges, the results emphasise the need to align ESG strategies with the socio-economic, environmental, and cultural realities of their jurisdictions. Exchanges operating in risk averse societies may need to take a gradual approach when introducing ESG innovations, ensuring that stakeholders perceive these initiatives as credible and low-risk. Conversely, exchanges in jurisdictions with high environmental performance or strong regulatory frameworks may leverage their position to lead in sustainability product innovation, using ESG as a competitive advantage to attract investment and differentiate.”