Wall Street may soon see a new stock exchange exclusively for environmentally focused companies amid a boom in demand for sustainable investments.
Green Exchange PBC is seeking regulatory approval to operate an exchange that allows investors to trade equities with a demonstrated commitment to ESG, according to executives. The Green Impact Exchange, GIX, would require public companies to show and stick to their ESG efforts, according to GIX Chief Executive Officer Daniel Labovitz.
“We are looking at how company’s govern themselves so green thinking isn’t just an afterthought, but threaded through their decision making from the very beginning, part of their core DNA,” Labovitz said in an interview.
Investments with stated environmental, social and governance aims are an increasing area of focus for corporate America as companies and investors look to preserve natural resources across the globe amid mounting political pressure. Some metrics used in determining the investments have been criticized for being hard to quantify, and at times with scant penalty when targets fall short.
GIX will enforce green-listing standards for companies, Labovitz said.
“If you don’t do what is required you are delisted, which is a reportable, public event,” he said. “If you are not adhering to the standards, there is a penalty.”
Corporations that are registered on other stock exchanges, including Nasdaq Inc. and the New York Stock Exchange, can choose to dual-list. They don’t have to choose one exchange or the other.
Like other major US equities exchanges, the new trading platform will allow investors to buy and sell equities, but only those with a specific ESG focus. GIX is expected to go live in 2023 upon approval with the Securities and Exchange Commission, Labovitz said. Talks with the SEC are underway.
To help define ESG, other companies have added tools for certain investment goals. Last year, the NYSE developed a class of publicly traded assets tied to services that are beneficial to the environment. It also joined with workplace-equity platform Syndio to help measure pay and opportunity gaps.
Investors have no shortage of exchange businesses to choose from. Nasdaq, Cboe Global Markets, and Intercontinental Exchange Inc.’s NYSE division each run multiple public exchanges, and there are dozens of private markets that operate inside banks. A new entrant will need sufficient investor interest to guarantee success. Already, with 16 equity exchanges, the competition for volume is fierce.
This would also be the first new exchange to register in the last two years, after MEMX, the Long-Term Stock Exchange and Miax Pearl got approval in 2020, according to filings with the SEC.
GIX’s founders hail from the NYSE, including Labovitz, who was previously in charge of writing regulatory policy, and Louis Pastina, former executive vice president in charge of operations at the exchange. James Buckley, regulation and compliance head at GIX, was former head of compliance at NYSE, according to the firm’s website.
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