Connected, cohesive, committed to change
ESG (environmental, social and governance) is becoming an increasingly
significant aspect of the decision-making framework for all financial firms. It’s
not just about making more sustainable investment choices; sustainability
requires all participants in the investment supply chain, from brokers to
technology providers, to address sustainability challenges and champion ESG best practice within and across
their own operations.
Sustainable Trading reflects the spectrum of practitioners in the financial
trading industry, committed to driving change in ESG practices in financial
markets trading.
Sustainable Trading members are motivated to make a real difference,
contributing their experience and expertise to the creation of a sustainable
trading environment, underpinned by sound ESG principles.
A collective commitment to industry adoption
An industry-led, consensus-driven approach will accelerate the pace of systemic change and embed consistent governance – and sustainable business practices – across the financial trading industry.
Sustainable Trading’s cross-industry working groups will consider issues, challenges and opportunities and determine ESG best practices to support firms’ plans.
Specifically, working groups will:
- Assess the environmental impact of building, operating and maintaining financial trading infrastructures, identifying new approaches for power optimisation and energy efficiency.
- Share insights and experiences to increase understanding of the importance and impact of diversity, equity and inclusion with the aim of influencing positive change across the industry.
- Look at broader ESG challenges including employee wellbeing, engagement with communities and stakeholder-oriented enterprise governance.
Driving ESG best practice in trading
“Diversity and inclusion contribute directly to the stability, fairness and effectiveness of the financial sector. There is therefore a strong shared interest in moving towards a more diverse and inclusive industry.”
impact and preserve our natural world
highly automated across a complex
array of systems, with significant resource use.
For climate targets to be met, substantial
improvements in energy efficiency are
required, with the EU setting a 40% reduction
target for 2030.
Environmental impact will become
a key element of decision-making
alongside performance and cost.
complex array of systems, with significant resource use. For
climate targets to be met, substantial improvements in energy
efficiency are required, with the EU setting a 40% reduction target for 2030.
Environmental impact will become a key element of decision-making
alongside performance and cost.
services organisations have had low
levels of gender, ethnic and socio-economic
diversity. According to the Boston Consulting
Group, diverse teams lead to greater and
improved innovation and performance.
more reflective of our diverse society
had low levels of gender, ethnic and socio-economic diversity. According
to the Boston Consulting Group, diverse teams lead to greater and
improved innovation and performance.
information and requires firms to take decisions
in the interests of their clients and their firm.
Best practices on decision making, information security, compensation and
risk management can be brought from the modern boardroom to be used on the trading floor.
a responsible business
and requires firms to take decisions in the interests
of their clients and their firm.
Best practices on decision making, information security,
compensation and risk management can be brought
from the modern boardroom to be used on the trading floor.
“Modifying existing practices to better address environmental and social sustainability matters is simply good business: it can help win customers; attract and retain talent; reduce costs and increase efficiency; and minimize risk and potential reputational damage. “
Setting the standard for ESG best practice
ESG best practices, developed by the industry for the industry, can be used as a roadmap for change for firms operating across a wide range of trading activities. Best practices will recognise the great work already underway in many firms and provide opportunities for all firms to improve their ESG impact.
Benchmarking tools
Sustainable Trading will oversee a benchmarking framework enabling self-certification and transparency, facilitating an ethos of continuous improvement for ESG best practices.
Benchmarking tools that collect tailored metrics and enable certification against industry best practices will support greater engagement and transparency between providers and clients.
Frequently Asked Questions
Sustainable Trading (ST) is an inclusive membership network dedicated to driving positive change on environmental, social and governance (ESG) practices within the financial markets trading industry. By fostering collaboration and harnessing industry expertise, we are mobilising the industry around a practical approach to ESG. We will proactively facilitate the creation of a roadmap for long lasting change that delivers shared goals, shared opportunities, and shared values.
Sustainable Trading is a member owned not-for-profit business that is run for the benefit of its members and wider stakeholders. Intellectual property contributed to the company will be owned by the members. Surpluses generated will be re-invested in projects and programmes as determined by the board.
Sustainable Financial Markets Limited has been registered in the United Kingdom as a company limited by guarantee. The company number is 13723197.
ST will develop sets of ESG best practices specific to certain trading services which, when followed, will result in ESG improvements to the operation of the trading service. Broad adoption and implementation of the best practices by the industry will result in significant improvements within the financial trading industry.
improvements within the financial trading industry.
The organisation will incentivise positive social and governance change in the trading and execution industry. Focus areas will include ethnic, gender and socio-economic diversity, employee wellbeing, engagement with communities and a stakeholder-oriented approach to management of businesses. This will be achieved through a combination of open dialogue, education and transparent disclosures.
From an environmental perspective, Sustainable Trading will focus on how the financial trading industry builds, maintains and operates trading infrastructure across all asset classes. In particular, data centre footprint, power consumption, cooling requirements and technology practices leading to energy use, associated 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.
Firms in the financial trading industry have incredible expertise within their businesses. 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 trading service.
Working groups will cover a wide range of topics. These could range 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. Another group may cover how to improve inclusion in a trading business, the appropriate 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.
Provider firms will be able to use a transparency framework to benchmark themselves against the list of ESG best practices for a certain trading service. Through this benchmarking approach they will be able to measure their progress 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 demonstrate an improvement in ESG.
Best practice benchmarking will also allow firms to compare their own sustainability and ESG position against the rest of the market. 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 industry. With sustainability an increasingly important topic for clients, being able to demonstrate the contribution of a provider to sustainable trading will be increasingly important.
The introduction of a set of standardised best practices will allow for engagement with firms providing trading services on a consistent basis. Clients will be able to understand the progress providers are making as they work to increase the sustainability of their business. Providers will be able to share information that summarises their overall progress, progress on each of E, S & G as well as being able to provide the underlying detail that will drive the summary metrics.
There are many initiatives in finance related to sustainability. The focus of many of them has been on financing green initiatives and digitalisation as well as new investment products, transparency from listed companies, and collective action that supports sustainable investing. Where other initiatives focus on investment activities ST will focus on trading operations. ST will enable firms to make substantive and practical progress and implement improved practices that will make trading processes more sustainable.
Yes. The approach taken by ST should be very complementary to a corporate ESG initiative. By focusing across the industry within trading businesses it will provide a platform to develop “grassroots” ESG champions whose efforts can support firms’ corporate ESG programs. Through collaboration, additional opportunities to introduce ESG improvements will be identified, especially where there is an advantage for groups of firms taking collective action or innovating in conjunction with providers. Improvements that create efficiency may also generate significant cost savings for firms.
It’s intended that ST will be funded from a combination of an affordable membership fee, a charge for benchmarking a trading service and consulting services. The standard annual membership fee will be £8,500 per year with lower levels for small trading operations.
Members of ST will be expected to help steer the organisation and provide resources who will contribute their expertise in one or more subject specific working groups. This will provide an opportunity for individuals to contribute to change not just at their firm but within the wider financial trading industry.
Firms will also be expected to use the best practise benchmarking when available. For providers to benchmark trading services and share those details with clients and for clients to use the benchmarking detail that providers deliver to consider the sustainability of their offering.
As an ESG investor you likely already engage with and actively influence the actions and plans of the companies you invest in. Involvement with this initiative will allow you to apply similar ESG principles to your own trading operations and decisions, aligning your trading process with the investment philosophy of the wider business. This holistic approach will be welcomed and, over time, may be required by your investor clients.
Members will come from all parts of the trading community including investment managers and hedge funds; banks, brokers and outsourced dealers; exchanges and trading platforms; and market makers. Providers of technology and services also have a key role to play. Membership is anticipated from a broad range of firms including trading system providers; network and hardware providers; analytics vendors; data centre operators and infrastructure providers; cloud companies; and technology and management consultants. Click here for a list of current members.
There are many highly experienced and capable experts within prospective member firms. ST will serve as a network where motivated experts can come together on specialist topics. Bringing together such expertise will allow for inefficiencies to be shared and approaches for improvement identified. These improvement opportunities will then be formalised within sets of standardised best practices which firms will be able to both implement and benchmark themselves against.
Trading servers are generally configured for maximum performance. In practise this often 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 3 – 4 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.
By creating a set of best practices for a given trading activity, firms will have an increased understanding on their options to become more efficient and begin to incorporate a greater number of these best practices into their trading operations. They will then be able to benchmark themselves against the practices and use the associated ratings to communicate with stakeholders and clients. It is also envisaged that firms will be able to understand their rating vs the broader position of the market. Clients will be able to use these benchmarks as part of a process of engagement and to determine which provider may be most suitable for their business. This may be through setting a level which a provider must exceed, doing more business with firms who excel on sustainability, or less businesses with those who fall short of the clients’ expectations.
Some best practices or metrics collected will be like those employed, more generally, when measuring the sustainability of a company or product. However, the measurement for the best practice will be structured to apply directly to the trading business of a provider. Examples could include measures such as male/female pay ratio within the trading business or the practice of purchasing trading servers that have a high rating for the sustainability of their manufacture and are easily recyclable.
Use of renewable energy is not a long-term solution in the absence of efficiency improvements. The renewable energy association (IRENA) indicates that as well as a shift to renewable energy the world also needs to reduce its energy intensity by two-thirds and the EU has a target to reduce energy intensity by 40% by 2030.
While there may be aspects of meeting the best practices that require additional costs or investment it’s expected that implementing recommended improvements will be positive for businesses. More efficient use of technology should result in costs savings and as highlighted in recent research from Boston Consulting Group, more diverse teams lead to greater and improved innovation and performance.
Given the focus on sustainability and ESG, governance of the organisation itself will be important. The formation of the board prioritised diversity from different geographies, backgrounds and ensured representation of different types of member firms. In future, independent board members may also be appointed to bring additional skills and differing viewpoints to the company board.
The concept of Sustainable Trading is relevant and applicable on a global basis and across a wide range of investment products. There is a clear demand for an organisation that brings sustainability to the trading process globally. The scope and reach of ST will be determined in conjunction with founder members and general demand from the industry. A phased regional and asset class development of the organisation is a likely approach that will lower risk and allow for increased impact.
ST expects to engage with regulators to ensure awareness of the positive approach being taken by member firms and the voluntary approach to efficiency across the industry can be incorporated into future regulation as deemed necessary. A global approach to improving the sustainability of the financial trading industry and consistent engagement with policymakers may also help to ensure that new ESG regulations regarding trading activities have increased global consistency.
For the industry to change and become more sustainable, collaboration will be needed between a wide range of different types of firms. Rather than leaving groups of firms to work in silos, ST will foster collaboration right across the trading industry from buyside to sellside to trading platforms to market makers and incorporate the providers, vendors, consultants, and technology firms that support those businesses. By involving such broad groups of firms ST will be able to help align the industry along ESG goals and harness incredible expertise from these organisations to identify and share practical opportunities for change.
Sustainable Trading supporters
