Created by some of the brilliant minds who built the Sustainability Accounting Standards Board (SASB), the Long-Term Stock Exchange is a first-of-its-kind exchange that invests in companies focused on long-term value creation, while requiring the listed companies to report on their sustainability.
As 2020 kicks off a new decade, the climate crisis already has been dominating the headlines — with recent conversations in Davos, Microsoft’s unprecedented carbon-negative commitment, and other activities in the business community. Although a warming planet poses a business risk, there are opportunities for growth in sectors across the globe via innovations in environmental, social and governance (ESG); which promote resilience and mitigation. When we focus on creating a more sustainable future, new businesses and industries arise.
The evolving landscape is prompting investors and consumers alike to demand more transparency and disclosure around corporate sustainability initiatives; looking for significant, long-term impact. Yet, we continue to live in the ‘Wild West’ of ESG — businesses and nonprofits are constructing their own guidelines from various ratings agencies and reporting frameworks. But one thing is for sure; money talks.
Enter the Long-Term Stock Exchange (LTSE). Created by some of the brilliant minds who built the Sustainability Accounting Standards Board (SASB), this first-of-its-kind stock exchange promotes sustainable business and invests in companies focused on long-term value creation, while requiring the listed companies to report on their sustainability.
Recently, thinkPARALLAX co-founder Jonathan Hanwit connected with Jean Rogers, Chief Resilience Officer at LTSE and founder of SASB, to learn about the inception of this new financial market and her plans to galvanize sustainability in the investment space.
Jonathan Hanwit: What is LTSE — and why should companies and investors care about it?
Net Zero: Aspiration vs. Reality in CPG & Retail
With thousands of consumer packaged goods (CPG) companies and retailers making net-zero commitments, but only 25% of them on track to meet them by 2035, there is a clear gap between aspirational thinking and reality on the ground. Join us as Capgemini and frog detail some of the tools, technologies, and shifts in mindset and skillset needed for companies to walk their talk and leave a legacy of resilience and stewardship for generations to come — Tuesday, Oct. 17 at SB'23 San Diego.
Jean Rogers: LTSE offers an ecosystem of support for companies that are built to last. It includes a national securities exchange, software and services for operating long term; and a coalition of companies and investors who measure progress over years and decades, not financial quarters. We offer companies a platform for building their businesses and advancing their visions over time, together with a public-market option that unites them with like-minded investors.
JH: Why did you and your team decide to create LTSE?
JR: In his 2011 book, The Lean Startup, Eric Ries — LTSE’s founder and CEO — called for creating a Long-Term Stock Exchange, which he described as “a new kind of stock exchange, designed to trade in the stocks of companies that are organized to sustain long-term thinking.” Fast-forward to the present, and that is precisely what LTSE is building.
We offer an alternative to public markets that pressure companies to hit short-term targets; together with software that supports companies who aim to create value over time, and run their business with the stewardship that stakeholders and society demand.
JH: How does LTSE differ from existing exchanges?
JR: The Long-Term Stock Exchange is the only US national securities exchange built specifically to provide a public market option for companies and investors who focus long term. To list their shares on the Exchange, companies would agree to adopt and publish a series of policies that are consistent with long-term-focused principles. By emphasizing a principles-based approach, LTSE provides companies with flexibility, while offering shareholders and other stakeholders insight into how the company operates its business for the long term.
JH: What are the potential challenges for LTSE?
JR: Like any marketplace, we need to show companies and investors the network-specific value in LTSE. That value comes from the ability of companies to source patient capital and to operationalize governance for long-term value creation and resilience. For example, companies that list on the Long-Term Stock Exchange will be able to use tools from LTSE to identify and engage long-term investors.
While all investors will be able to buy and sell shares on the exchange, we think the ability to engage long-term investors will enable companies to build bonds with investors who support their vision.
JH: You say this is the first legally binding, long-term-focused stock exchange. What does this mean, exactly?
JR: LTSE is the first national securities exchange with listing standards that are focused on long-term value creation. By listing with the Exchange, companies agree to abide by those standards, which support their commitment to creating value over time. AT the same time, listed companies have the complete liquidity that comes from listing their shares on an exchange that forms part of the national market system.
JH: What kinds of companies do you foresee benefiting most from LTSE?
JR: We are building LTSE to benefit long-term-focused companies in every industry that aspire to create value through continuous innovation, while doing right by stakeholders and reinforcing the best of their cultures.
JH: Can you walk us through the process for companies to be listed on LTSE?
JR: When it opens this year, the Long-Term Stock Exchange will accept listings from companies that either are going public or that are already public and would like to have their shares on both the LTSE and their primary exchange.
To list on the LTSE, a company would develop and publish the policies for long-term companies that the exchange requires. The rules require that listed companies review the policies at least annually, and make them available publicly and free of charge on or through the company’s website.
JH: How will stock exchanges change over the next 10-15 years? Will they all eventually become like LTSE?
JR: I think we are seeing the long term become business as usual. The next generation of great companies is being built from the ground up to create value through continuous innovation. Company builders want to run their businesses with the stewardship that society demands.
At the same time, workers, consumers and communities are holding companies to a higher standard of responsibility. Nearly three-quarters of people surveyed recently by Edelman agree that a company can take actions that both increase profits and improve conditions in communities where it operates. And, of course, we already see trillions of dollars of capital being allocated, accordingly.
Unfortunately, incumbent exchanges have created a race to the bottom, believing that lower standards improve US competitiveness. Exchanges around the world have already embraced sustainability, from a disclosure perspective — with various reporting requirements to suit market demand — but the US exchanges have resisted. At LTSE, our differentiated listing standards enable companies to take a broader and longer view of success, supporting innovation and competitiveness. It doesn’t really matter if other exchanges become like LTSE. The exchange is just the infrastructure. What we need is for more companies to become long-term-oriented, so that they can tackle the big systemic challenges our society faces. That transition is already beginning and we are there to support the companies leading this movement.
JH: Is there anything else that you’d like to mention?
JR: Part of making the long-term business as usual is companies being governed with a broader and longer view that takes account of their employees, customers, suppliers, communities, investors, the environment and society.
As founder of SASB, I know the value of disclosure. But the reason I joined LTSE is the opportunity it offers to help companies go beyond producing data and chasing ESG ratings to building businesses that are governed with a determination to drive better outcomes over the long term, not just better disclosure.
What gets measured gets managed … but only if it is embedded into incentives and governance. That’s what we are doing at LTSE.