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Create a new stock exchange for companies seeking to be climate leaders and impact investors looking for reliable performance metrics.



Reducing industrial emissions will require cooperation from innovative new businesses, the financial industry, and potentially governments.  All actors need better information about the impacts of particular businesses.  In the past decade, there have been several initiatives for reporting standards including B-Lab, which offers a B-Corp certification for companies that meet higher reporting and performance standards.  We propose that the B-Lab and partners go one step further to establish a new not-for-profit stock exchange.  The two requirements for members are that they that agree to report their environmental and social impacts and pay a small percentage of their calculated social welfare costs based on their reported impacts.  In return, companies would have access to funds, potentially at a lower cost, feedback on their performance, and publicity for their initiatives.  The industry data gained from this project can help investors, businesses, and governments assess the benefits and challenges of internalizing environmental and social impacts into the cost of business.  

What actions do you propose?

We propose the formation of a new not-for-profit stock exchange--the Social Governance Securities Exchange (SGSE)--that allows companies to assert environmental stewardship through stock issuance.

The first listing requirement of the SGSE include annual accounting and reporting of environmental and social performance metrics.  This reporting will reveal heretofore unknown information to financial markets that can price the securities of these corporations in accordance with their long-run social value.  Only reporting standards not performance standards would be required.  Those who also meet high performance standards could then be certified as a B-Corp or other certification.  

We recommend that specific metrics be developed that are based on the reporting requirements in the Global Reporting Initiative and the Carbon Disclosure Project, which are similar but not exactly the same.  For example, the most important metric for reducing industrial emissions is the carbon footprint of operations.  The assessment for becoming a B-Corp refers to the GHG footprinting requirements in the Global Reporting Initiative and also provides a link the the US EPA’s GHG footprint calculator (  

We recommend that additional tools for calculating impacts be developed and made available for members.  For example, the financial information in the 10-K’s could potentially be used to automatically estimate a GHG footprint.  This is because the income statement and cash flows statements have some descriptions for how the company’s assets were used.  

The second listing requirement is for companies to pay an “impact fee,” which is calculated annually based on a company’s reported impacts and a credible social cost of impacts.  For example, the product of a social cost of carbon and the GHG footprint would represent the total social cost to the international community of their carbon footprint. The “impact fee” would be a percentage of this total social cost.  This fee will allow member companies to demonstrate financial robustness in the presence of a carbon price, in a way that companies cannot currently demonstrate. Furthermore, the proceeds from the impact fee will fund the operation of the exchange, and any excess proceeds above the amount necessary to cover salaries and operations will go to finance competitive social impact project bids by member corporations.  We recommend that the fee can be very small percentage at first (2% or so), and then be subject to increases later depending on the wishes of the members.  



The end goal of the SGSE is for the private sector to internalize environmental and social externalities.  In other words, In other words, business would make decisions as if negative impacts to the environment and social welfare will be borne by the company.  Then financial markets would allocate capital to companies and projects that have the least negative environmental and social impacts and businesses would pursue corporate social responsible practices.  In addition to voluntary industry initiatives, government programs such as cap and trade or a carbon tax may be necessary.  All of these paths for more efficiently allocating resources responsibly require large amounts of readily available and comparable data on the impacts of private sector activities.   

Getting more standardized data on private companies would help the companies themselves evaluate the impact of internalizing externalities.  Providing metrics would help them identify opportunities to reduce their impacts for the lowest cost.  The disclosure of environmental performance can be a boon for corporate social responsibility (CSR) efforts.

The SGSE would also enhance social investment opportunities by identifying and certifying high performing businesses.  There are some investors, especially among high net worth individuals, that are interested in impact investing.  There are also some institutional investors and individual investors interested in socially responsible investing.  Collecting enough information to evaluate different companies is resource intensive and thus expensive.  That is why most socially responsible investors use fairly simple but subjective screens for environmental and social impacts.  Socially responsible investing is also less accessible for individual investors.     

Another motivation for the SGSE is that information from participants of the SGSE would help governments to evaluate the impact of climate legislation on the economy.  For example, the information on the impacts would give governments more reliable estimates about what companies would have to pay if there really was a carbon tax.  They would also get a better sense for which industries and companies would be affected the most.  The SGSE also provides a prototype for administering data intensive programs.  In other words, the methods for collecting information is an option for implementing an economy-wide carbon tax rather than piecemeal taxes for specific sectors.  Finally, the SGSE could become a platform for administering government funds such as ARPA-E.    

Lastly, the SGSE can pilot reporting standards and evaluate the administrative burden on companies.  Investors, shareholders, and the government all need better information on the environmental and social performance of companies. Reporting of emissions associated with business activities must be standardized.  However, it's possible that requiring more CSR reporting on 10-K’s poses too much of an administrative burden for businesses.  The SGSE provides a venue for a smaller set of companies to participate in standardized impacts evaluations in order to first evaluate the process.  

Who will take these actions?

We recommend that B-Lab take on this project in conjunction with CERES, the UNPRI, and the NASDAQ OMX Group.  

B-Lab is a non-profit that offers B-Corp certifications ( for companies that meet its environmental and social performance, accountability, and transparency standards. This stock exchange could allow current B Corps that may be capital-constrained to raise capital, thus providing another tangible benefit to being a B Corp.  Participants of the SGSE that are not already B Corps would at least already be reporting their performance and thus on a path to becoming a B Corp.  

The Coalition for Environmentally Responsible Economies (CERES) convened the Global Reporting Initiative ( in 1997 as an effort to incorporate sustainability in corporate reporting. As such, CERES can direct the content and format of the reporting to be done by member companies.

The UNPRI is an investor initiative for incorporating environmental and social governance (ESG) principles in the finance industry.  It is backed by the UNEP Finance Initiative and the UN Global Compact.  They would also be able to direct the content and format of the reporting in a way that would be relevant for investors, especially impact investors and socially responsible investors.  

The NASDAQ OMX Group is a publicly-traded organization that owns and operates NASDAQ, the world’s second-largest stock exchange. NASDAQ was the first major stock exchange to use electronic trading and can similarly help shepherd the financial system’s expansion into a more “triple bottom line” paradigm.

Where will these actions be taken?

Ideally, two SGSE’s should be established where one should be in a developed market and another should be in an emerging market.  For the developed market, New York City would be an obvious place because it is the location of the biggest financial market.  However, London is also home to a vibrant UK and European financial market, and there is more interest in socially responsible investing and corporate social responsibility there.  Ideal locations for a SGSE in an emerging  market include Shanghai, China, Mumbai, India and Sao Paolo, Brazil.  They are the homes of the biggest financial markets in Asia and South America, where the economies are expected to see rapid growth in the next century.  

It’s important for the new stock exchange to be established in a developed country in order for the project to have credibility.  We need to show that companies in developed nations are not afraid of standardized disclosure, especially since they should have more resources available to assess and report their impacts.  Practices in developed markets are held up as standards for developing markets.  If we were only able to establish one, it should be in a developed market.  

At the same time, the biggest increases in emissions are expected to come from developing countries.  As a result, the potential benefits of establishing a SGSE in a developing country would probably be higher.  Also, the financial markets are still getting more established in emerging markets so it may be easier to establish new standards right now.  

How much will emissions be reduced or sequestered vs. business as usual levels?

The initial returns in terms of carbon emissions would be modest.  The initial SGSE membership is expected to be a highly self-selecting group of low-carbon businesses that wish to raise their profile as socially responsible enterprises. However, the early years of operation will serve as proof of concept for the administration and execution of social governance reporting, as well as the assessment of a carbon fee for member companies that reflects their net social impact. This early experience should encourage other companies-whether new companies raising equity for the first time or established companies switching from other exchanges-to apply for SGSE membership to enjoy the benefits of certification as a socially responsible corporation. In the long-term, SGSE-style reporting can be incorporated into standard SEC and FINRA reports, which will allow for optimum emissions reductions of 10-20% from the initial baseline within 20 years.

What are other key benefits?

Other benefits are better corporate governance, better relations between the private sector and communities, better consumer products, reduced waste in advertising social and environmental benefits (greenwashing), and the voluntary adoption of a price on carbon.

What are the proposal’s costs?

The costs of founding and administering the SGSE are modest.  We estimate the costs to be on the order of $1 million per year.  

Time line

The period for soliciting and securing seed funding and establishing the exchange framework will be approximately 1 year. Soliciting charter exchange members will take an additional year thereafter. Within 30 months, the exchange should be up and running with initial rounds of capital raising underway. 

Related proposals

This proposal is not similar to any other proposals in this contest. 


B Corporation


Carbon Disclosure Project




Global Initiative for Sustainability Ratings


Global Reporting Initiative



UNPRI. Annual Report 2012.


Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Brookings Institution Press, 2005.


World Bank Group. Mobilizing Climate Finance: A Paper Prepared at the Request of G20 Finance Ministers. World Bank Group, September 19, 2011.