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Part I:
Measuring Sustainability Disclosure
on the World’s Stock Exchanges
In this section we rank the world’s stock exchanges
based on the sustainability disclosure practices of
their listed companies.
A total of 45 stock exchanges
26
were included
in our study, and the sustainability disclosure
practices of each exchange’s large listings were
evaluated on three measures: disclosure rate,
disclosure growth and disclosure timeliness.
27
Methodology
The ranking is established by deriving a
disclosure
score, disclosure growth score
and a
disclosure
timeliness score
as follows:
a.
Disclosure score: The disclosure score ranges
from 0 – 50. The first step in determining the
score involved looking at the average number of
first generation sustainability indicators disclosed
by large companies trading on each qualifying
stock exchange in 2011. In the second step, this
raw score was percent ranked.
28
In the third and
final step, each exchange’s percent ranked score
was multiplied by 50.
b.
Disclosure growth score: The disclosure growth
score ranges from 0 – 20. The first step in
26 Identified as stock exchanges with at least 10 large companies in any three
of the five years in our study period (2007 – 2011). Large companies defined
as those in Bloomberg’s equity universe with a market capitalization of at
least US$2 billion as of December 31, 2011.
27 The weighting scheme that we employed for these factors is effectively
arbitrary. The disclosure score was overweighted (50%) because it was
felt to be the most important and most easily measured metric. The
disclosure growth score was underweighted (20%) because it was felt to
be comparatively the least important and the most difficult to measure.
The disclosure timeliness score was weighted in between the other factors
(30%) because it receives comparatively little attention in the sustainability
disclosure literature.
28 Percent ranking is a common statistical technique that converts a value
in a data set into a percentage based on each value’s relationship to the
total data set. To illustrate, the Euronext Lisbon stock exchange had the
highest raw disclosure score, at 5.4 out of a possible 7. It therefore received
a percent rank of 100%. The Nasdaq stock exchange, by contrast, had the
lowest raw disclosure score at 0.48 out of 7. It therefore received a percent
rank of 0%.
determining the score involved looking at the
average compound annual growth rate over
the 2007 – 2011 period of disclosure by large
companies on each qualifying exchange for each
of the first generation sustainability metrics.
In the second step, this raw score was percent
ranked. In the third step, each exchange’s percent
rank was multiplied by 20.
c.
Disclosure timeliness score: The disclosure
timeliness score ranges from 0 – 30. The first step
in determining the score involves looking at the
percentage of large companies on each exchange
with a Q4 2012 financial year-end that had
published 2012 sustainability data by July 1, 2013.
In the second step, this raw score was percent
ranked. In the third step, each exchange’s percent
rank was multiplied by 30.
Each exchange’s overall score is a sum of these
three sub-scores.
While this approach allows for comprehensive
assessment, it does not purport to be a
complete
evaluation of corporate sustainability disclosure
practices. For instance, it does not measure
the
quality
of data being reported (e.g., the
comparability or accuracy of the data).
29
However,
as mentioned above, our approach constitutes a
robust measure of disclosure performance, based
on clear and objective criteria.
29 However, since Bloomberg employs quality control mechanisms
at source, our analysis was based on data that had already passed
integrity thresholds.
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