The framework offers a practical, step-by-step approach for firms to make measurable progress, earn recognition and contribute to higher industry standards, the firm said.

“One of the things that’s important with frameworks of this type is to have a publicly accessible structure that clearly shows how someone can progress through it,” Duncan Higgins, chief executive at Sustainable Trading, tells The TRADE.

“The primary goal is to give members a really clear approach to advancing their sustainability efforts across three key areas – one is their engagement with us, the second is around the change that they make happen within their organisation and then the third is around advocacy for broader change.”

Members progress through the framework via five incremental levels: participating, contributing, adopting, integrating, and delivering, with each level building on top of the previous element.

This progression involves active engagement in Sustainable Trading’s work programme and meetings; incorporating practical change within one’s trading business; and engagement on sustainability.

Sustainable Trading added that the Member Progress Framework was developed in response to member demand for an actionable way to track and communicate sustainability efforts.

“We spoke to a large number of our members when we designed, built and refined the approach of the framework. The solid set of input from all the firms involved helped to create strong foundations for the approach,” adds Higgins.

“Now that it’s finalised, we have been reviewing with each and every member to help them identify where they sit within the framework. Importantly, also what additional actions they can take in order to achieve a higher level of progress and recognition.”

The framework also aims to offer an approach to sustainability in operations of trading businesses which reflects where the industry stands today, while complementing broader corporate initiatives.

The offering seeks to provide organisations at any stage with a clear starting point, allowing them to progress at a pace that is suitable to their resources and priorities.

At each level attained through the framework, members earn recognition of progress and are able to share their attainment level with stakeholders, clients and industry peers to demonstrate their commitment to sustainability.

Sustainable Trading added that as more firms advance through the framework, the aim is to elevate sustainability standards industry-wide, fostering long-term, holistic change.

Higgins explains: “We had an incredible amount of energy, enthusiasm, time and effort from all of our members in creating our initial work output, which was a really extensive set of best practices around environmental, social and governance topics, and a way of being able to measure the implementation of those practices.

“This framework builds on that by giving members very clear direction on how they should utilise those resources, implement those practices, incorporate measurement and integrate these tools into their annual planning process. It helps them assess their position understand the progress they’re making in the industry and, importantly, demonstrate this progress to stakeholders, clients and the people in their firm.”

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GIX submitted its Form 1 application on 9 May 2023, outlining plans to operate a fully automated electronic trading platform for the trading of listed equities – no physical trading floor is planned.

Daniel Labovitz

Specifically, the GIX plan is to list companies that make a “binding commitment” to set, implement, measure, and achieve sustainability goals while being transparent with investors about the state of play as things progress.

Importantly, companies can dual-list and be recognised on GIX without giving up their primary listing exchange.

Prior to launching GIX, founders Daniel Labovitz (CEO) and Charles Dolan (COO) served as head of regulatory policy and executive floor governor, respectively, at the New York Stock Exchange (NYSE).

Speaking to The TRADE, Labovitz highlights the key motivations behind listing on GIX: “Voluntarily taking on a dual listing matters. It says something about the integrity of the company and the character of its leadership that they’re willing to do this, create value in the long term, and be held accountable for it.”

“If your company makes a gesture that says, ‘I am willing to be held accountable for my environmental promises through the listing process’ that is a really significant statement. It means your company is sincere in its motivation to follow through on those promises. It means you’re serious,” explains Labovitz. 

Discussing the aims of GIX, Labovitz tells The TRADE that it comes down to addressing all aspects of an exchange’s offering.

“Contrary to popular belief, an exchange is not just about ‘buy, buy, sell, sell,’ which is the domain of brokers. The true essence lies in the infrastructure that supports these transactions. The role of GIX is to provide an unbiased platform where investors can meet to buy and sell, guided by credible, reliable, and trustworthy information. This is the essence of what an exchange does, and GIX is committed to fulfilling this need for the sustainability world.”

Read more: Keeping ESG commercial

Once live, the GIX trading platform is set to be powered by technology from exchange operator MEMX. In addition, GIX has confirmed that it will be part of the National Market System (NMS), ensuring best execution for all trades directed or routed to GIX. 

Furthermore, the exchange plans to implement a ‘return to green’ program set to commit a portion of its gross revenue to support companies focused on sustainability.

In an announcement, the SEC stated: “The Commission is publishing this notice to solicit comments on GIX’s Form 1 application.  The Commission will take any comments it receives into consideration in making its determination about whether to grant GIX’s request to be registered as a national securities exchange.”

The founders – including Jim Buckley, former chief regulatory officer of the National Stock Exchange, and Lou Pastina, former executive vice president of operations on the NYSE floor – all have decades of experience in capital markets, working for and with major US stock exchanges.

Over the years, the individuals witnessed developments in the marketplace and capital markets and also saw their own personal beliefs evolve, recognising the importance of leaving the world a better place, Dolan tells The TRADE. As a result, they pinpointed a need for a sustainability-focused stock exchange and recognised that they could be the ones to build it.

Dolan adds that more recently, conversations are being had with key buy-side players: “Our discussions with major buy-side firms have revealed a high level of interest in our initiative. They believe our direction will significantly influence asset allocation decisions and other industry practices, making it a game-changer for the entire sector.”

Read more: Goldman Sachs Asset Management hit with $4m SEC penalty over ESG violations

Speaking in an announcement today, Shiva Rajgopal, advisor to GIX, affirmed that it is the accountability for sustainability promises which is key.

“The marketplace needs a ‘trust but verify’ approach to help reduce greenwashing. There’s a tremendous financial opportunity to bring together sustainable-minded investors with companies working hard to meet their environmental commitments. For that opportunity to be realised, there needs to be better transparency and accountability of sustainability initiatives and reporting. GIX will provide that.”

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As well as contributing to the financing of the certified climate project, The TRADE additionally supports tree planting in the UK. For every tonne of CO₂ saved through the contribution, one tree is planted, promoting the conversion of structurally poor forests and monocultures into more resilient mixed woodlands that can better adapt to changing climate conditions.

In addition, the climate project combines verified CO₂ emission reductions with an additional commitment. European ecosystems are affected heavily by climate change: Tree species such as spruce suffer from drought because their shallow roots do not reach deeper, water-rich layers of soil. Thus, they are weakened and particularly susceptible to pests. Storms also take a heavy toll on these shallow-rooted tree species. Our additional commitment addresses this issue and supports the reforestation and conversion to more resilient mixed forests. The certified climate project is registered with international standards.

This scheme contributes to the following UN Sustainable Development Goals (SDGs):

Since 2021, The TRADE has been working in partnership with eco-friendly printing specialists, Park Communications, currently considered to be the most environmentally friendly printer in the UK. Together we produce climate neutral print magazines using vegan based inks, FSC® certified paper and carbon neutral packaging produced from sugar cane. In addition, each publication is manufactured using 100% offshore wind electricity sourced from UK wind, while 95% of press chemicals are then recycled for further use and, on average, 99% of any waste associated with the productions will be recycled; and the remaining 1% used to generate energy. Our print partners are ISO 14001 certified, and work to EMAS, the EU ‘gold standard’ for eco-friendly businesses.

If you are interested in subscribing to The TRADE Magazine, annual print subscriptions and individual back issues of the publication are available to purchase via our online store.

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But running through the Brighton born and bred Papanichola’s veins is an activist streak that has continued to influence his decisions and shape the course of his career to date, ultimately leading him to his current role as head of trading at London-based activist hedge fund, Bluebell Capital Partners.

Papanichola began his career at interdealer broker, GFI, however quickly realised the environment wasn’t the one for him. “Interesting, lucrative, fun but highly unconventional,” he says. 

He subsequently joined RBC on the graduate training programme three weeks later in 1998, serving for a brief – and what would turn out to be his only – stint on the sell-side for three months. It was then that he moved onto the proprietary trading desk at the bank, mentored by former head trader at Moore Capital, Joe Cardello, and Jim Byrd, global head of macro trading at RBC.

“My key takeaway from those guys was that the core foundation of trading isn’t about buying and selling. It’s about risk management philosophy and methodology,” explains Papanichola. “During that period of my training, I was actively taking positions, taking risk, fundamentally managing a portfolio of sorts in macro products.”

“Both [Cardello and Byrd] were incredibly patient with me. It was a really good place to learn because they gave me so much latitude to do what I wanted. I could literally trade any product if I wanted to. When you’re on the FX floor, it’s buzzy and crazy and the characters tend to be interesting. There’s us sitting in the middle of the room trading once a day maybe sometimes once a week but taking very big positions and actively providing information for the room as well.”

Core values

After two years at RBC, Papanichola landed himself his first hedge fund role at Elliot Management Corporation as a multi-product manager and arbitrage portfolio manager mentored by Jon Pollock, Jean Luc Harnay, and Phil Streeton. It was a role that was less than conventional, but made up some of his most formative years, he tells The TRADE.

“It was basically six guys in Berkley Square in a loosely regulated industry at a time where markets were incredibly imperfect,” says Papanichola. “I cut my teeth in investment trust arbitrage and fund reconstructions. These are old investment structures which, pretty much in the majority, have no place in modern investing.”

“We weren’t a dealing desk, we were a trading desk so we actually took and actively managed positions but were also the eyes and ears for the more traditional PMs within the firm. As Elliot has gotten bigger, those jobs have become much more pigeonholed. The traders are now discretionary execution guys and the portfolio managers (PMs) don’t get involved. They’ve become more of a conduit between the street and the PMs at Elliott but when I was there we were jack of all trades, master of none, for want of a better phrase.”

Covering the European, Asian and US markets from one seat, Papanichola spent almost five years working around the clock, before finally jumping off the rollercoaster in 2005 for a career break. It was then that he founded a sustainable water company, Life Pure Water, and it’s associated charity, Drop4Drop, that delivers clean drinking water to countries in the developing world. It was during this period that Papanichola set his sights on finding a more meaningful way of taking part in the financial markets.

“We all should have something to add value ultimately and that’s why I shied away from other forms of investing in other parts of my career. My initial career was sitting in front of screen looking at two numbers, reshuffling the pack, going home and hoping that the number wasn’t red at the end of the day,” he says.

Now almost two decades old, Life Pure Water is carbon neutral, only uses recycled plastics, has an organic only catchment area, doesn’t export, and gives away 10 times the amount of water that it sells to the third world. However, when asked about the motives behind Life Pure Water, Papanichola is reluctant to call the firm charitable, instead insisting that the success of the charitable causes lies in its commercial performance. Something he’s taken forward into his current role at Bluebell Capital Partners.

“The idea of Life Water is not to be a solely charitable vehicle, but actually quite the opposite. The idea is that ethical companies can be responsible but they can also be commercial. The nature of the commercial side of that business is actually complementary to the charitable side. The more money the business makes, the more money the charity makes,” he explains.

Papanichola then re-joined the industry in 2007 for a brief stint on Barclays’ proprietary trading desk before serving in a series of head of trading roles at hedge funds Perry Capital, Centaurus Capital and P Squared Asset Management. 

Bluebell Capital Partners

It was in 2019 that Papanichola found Bluebell Capital Partners, a start-up hedge fund focused on activist investment tucked away in the back streets behind Sloane Square. The firm has run interventional campaigns involving the likes of Lufthansa, Hugo Boss, Mediobanca, Vestas, Danone, GlaxoSmithKline, Glencore, Saint-Gobain, Solvay, Richemont, BlackRock, Bayer and Worldline. And those are just the public ones. 

Set up by industry stalwarts Giuseppe Bivona, and Marco Taricco, Bluebell Capital Partners is a spin out from Bluebell Partners, an investment advisory business set up by the same pair in 2014. According to the firm’s rather aesthetic website – donned with an ever-rolling video of gently crashing waves – Bluebell champions a unique ESG approach, whereby it invests in businesses and seeks to increase shareholder value through “constructive engagement”. 

“Being involved in this type of investing, we genuinely add value to financial markets. We typically engage with the company on a constructive basis first, before going public,” adds Papanichola. 

“The fundamental philosophy of activist investing isn’t to go in like a bull in a china shop trying to smash down rock-solid doors. We tend to push on doors which are slightly ajar. You have to always accept and have the humility to say we will be wrong, but we want to be right many multiples of the times that were wrong.”

The firm found itself in the press recently thanks to its involvement with BP, coming under fire from those who suggested its discouragement of the oil and gas company’s involvement in renewables was driven by anti-net-zero intentions. A suggestion which head of trading Papanichola fervently denies.

“The reality is that in this investment case involving renewables they have is actually dilutive to the core business, as they don’t have the necessary capabilities and target returns at below their WACC (Weighted Average Cost of Capital),” explains Papanichola. 

“Is it right that a company that doesn’t really have the correct approach to renewables should invest so much money in this sector? Or should that money be returned to shareholders and shareholders make the active/successful decision to put that money into renewables elsewhere?”

A hybrid role 

Bluebell has a small but punchy refit. It trades equities only – dabbling in equity derivatives when the need arises – and roughly a third of its trades are public, Papanichola confirms. It outsources everything outside of its core functions including its HR, accounting, IT, compliance, custody and data management. 

“We outsource as much as we possibly can whilst retaining responsibility which leaves a very efficient and in no way compromised business which allows us to just focus on investing,” says Papanichola.

The hedge fund favours what Papanichola pegs as an up-and-coming investment style. It champions one core concentrated fund of about 10-15 names. It then runs a sub fund taking the best strategies or a name that is doing particularly well – this could be one security or a hedge on a security – and offers it out to its current investors on a first come first serve basis. Positions in just one name can be sizable, says Papanichola. 

“It’s an investment style that has really taken off in the last 15 years. I see our style of investing probably having more of that in it over the next five to 10 years.”

Papanichola is the only primary trader at the firm. However, in the event of his absence, it has various back up models in place including cover from within the firm and outsourced trading firm, Williams Trading, on standby. Bluebell focuses mainly on Europe, and while it has some dealings with the US, the US open is a sufficient amount of overlap with European market hours to satisfy its trading needs, Papanichola confirms.

“We also have a disaster recovery backup model where we can use an outsourced trading house to manage our executions if we need to or act as an extra layer of execution above and beyond the prime brokers that we use and the algos that we use,” he says.

“We use a variety of high and low touch. Obviously with Mifid we have to focus on best execution. We aren’t really involved in a huge amount of block trading because we don’t have that size requirement currently. We have done some especially in the SPVs [special purpose vehicles]. It’s something that I did in previous shops probably 90% time whereas here, I’d say 90% I’m using algos or low touch. It’s a very different model but as we grow, that ratio will change.”

The firm is passive in its execution given the nature of the business it is in. For Papanichola, it is long-term relationships with the street that make success using this method of trading possible. 

“What we’re trying to do here is we create a skeleton with our story and investment thesis. Then the trading is really about delivering what we’re trying to achieve in the most efficient and cost-effective way possible. At our size, we can do that very effectively with algos that are available to us,” explains Papanichola.

 “Something that I had to learn very early in my career is that it’s about bringing the street close to you rather than working against it because it just doesn’t improve or foster the right relationships – especially when you’re trying to do stuff that’s incredibly secretive or where you’re involved in stake building.”

Pete Papanichola had been around the houses before landing his current role at Bluebell. After a short spell in banking, an enduring period of ruthless hours at various hedge funds and a brief career break to co-found a sustainable water company among other ESG-championing campaigns, he has found a role that suits both the capitalist and the charitable streaks within him. As for Bluebell, in its line of business and current stage of growth, that will no doubt be a name heard in the press again in the not-too-distant future.

The post Keeping ESG commercial appeared first on The TRADE.

The three firms join a growing list within Sustainable Trading’s global membership network of investment managers, banks, brokers, exchanges, trading platforms and service providers who share the goal of improving the sustainability of global markets.

Members of the network are now making progress with the implementation of the Sustainable Trading Best Practices, Sustainable Trading confirmed, through which the associated measurement framework will be utilised by members to track their progress and benchmark themselves against their peers.

Watch now: Sustainable Trading’s Duncan Higgins on integrating ESG into trading

The addition of Exegy, ING and Optiver follows the recent appointment of Eleni Coldrey of Euqinix, Asha Patel of Instinet and Ebrahim Patel of RMB, to Sustainable Trading’s board.

“We are delighted to welcome Exegy, ING, and Optiver to our membership network. Their extensive experience of global markets, and common commitment to driving a more sustainable future for the financial industry, will bring invaluable insights to Sustainable Trading,” said Duncan Higgins, founder and chief executive at Sustainable Trading. 

“Their participation further strengthens our collective efforts to drive positive industry change and greater sustainability in the global markets trading industry.”

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Starting from 22 January, Eurex will begin trading futures on SRI indices calculated by STOXX and MSCI, strategic partners in Eurex’s offering of derivatives on ESG indices. 

The STOXX Europe 600 SRI index will be used by the new derivatives contracts, as well as MSCI’s SRI index suite, covering Europe, USA, world and emerging markets. 

Contracts based on SRI indices will meet growing demand for an advanced ESG methodology, according to Eurex.

“We are very pleased to further strengthen our leading role in the ESG segment with two strategically strong index providers,” said Randolf Roth, member of the Eurex executive board.

“Our offering will certainly appeal to new user groups that have stricter ESG mandates and need to invest responsibly, such as asset managers who invest on behalf of endowment funds or foundations.”

Read more: Eurex focused on harmonising onto one risk management framework 

Eurex stated that the product launch will be supported by a liquidity provider scheme, offering regular rebates and revenue sharing elements.  

Derivatives on ESG indices were first launched by Eurex in February 2019 and since then, total volume reached nearly 11 million contracts by the end of 2023.

Average daily trading volume last year was more than 12,000 contracts, with annual trading volume roughly 5% above 2022.

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TMX Datalinx, the information services division of TMX Group today unveiled its Environmental, Social and Governance (ESG) data hub.

Through this initiative, which includes involvement from leading ESG data and analytics providers, ESG considerations will be integrated into the investment decision-making processes of TMX’s clients.

Speaking to The TRADE, Michelle Tran, president of TMX Datalinx, said: “Our goals have always been client focused and ESG is one of those things which is coming up more and more when we discuss data with our clients.

“In today’s environment we see ESG market data as important to investors and traders, especially looking at how their investment decisions get made and how they use the information given that there’s lots of complexity in ESG data in terms of quality and different types of metrics.”

The hub will deliver data to clients and include: climate action plans, impact quantifying, company and controversy screening, news and event coverage, corporate peer analysis.

Discussing the data sources themselves and TMX Datalink’s approach, Tran told The TRADE: “We really looked at specialised providers and we treat it like a portfolio and ask ourselves, okay so where’s the gap? We very carefully select our ESG content providers and partners – it’s not a marketplace. We don’t say come one come all.”

“[…] We’re doing the hard work of sort of curating so I think keeping track of the partners that we bring on and their constructive feedback will be a win for both sides.”

Confirmed data providers for TMX ESG are: OWL ESG, MT Newswires, GIST Impact, Inrate, Wall Street Horizon.

Read more – The TRADE predictions series 2023: ESG

TMX Datalinx serves customers globally with a broad range of both real-time and historical data products. 

Speaking to The TRADE about the future focus for TMX Datalink in this vein, Tran highlighted plans to continue to involve clients in the strategy: “I think when we launch our hub, we’ll probably be calling for our clients to say let’s create a committee of ESG data experts to ask how and where we can help our clients solve problems […] we want to use this opportunity of launching the hub to have those deeper conversations with our clients to see if this set resonates and using that as a direction for our expansion and longer term road map.

“I think if we take this further down the line, down the value chain, what we hope is to be able to not only expand the coverage, but we also expand the partnerships to actually create and drive other products off of this.”

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The new ESG clearing compass will consist of two services: the ESG Portfolio Assessment and the ESG Visibility Hub.

These new services come as part of Deutsche Börse’s intentions to support the sustainable transformation journey of clearing members and their clients by increasing transparency and awareness regarding cleared portfolios and counterparties.

“The clearing industry is at an early stage of the transformation journey. We highly appreciate the efforts of Eurex Clearing to enable its clients to have more data transparency and awareness of their ESG profile and strategy,” said Pauline Engelberts, global chief operations and chief sustainability officer, ABN AMRO Clearing N.V.

“This will pave the way for better climate metrics. We are happy to support this initiative.”

The ESG Portfolio Assessment service evaluates securities delivered as margin collateral and default fund contributions with a range of climate metrics and data.

The new data offering will be beneficial to clients looking to decarbonise their portfolios, improve their monitoring and reporting facilities or reconcile their ESG strategy.

Elsewhere, the ESG Visibility Hub will offer clearing members increased tools to highlight their ESG profile and initiatives on Eurex Clearing’s website.

Market participants will be able to use this information to assess counterparties that they do business with, based on their sustainability profile and ESG strategy.

“Many market participants still struggle with incomplete, inconsistent or insufficient data regarding their exposure to climate-related physical and transition risks,” said Christina Sell, chief sustainability officer, trading and clearing at Deutsche Börse.

“As a financial infrastructure service provider, we consider it our responsibility to contribute to transparency. With our innovative offering, our members can efficiently receive high-quality ESG data via established channels.”

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Tom Stevenson, head of equity trading EMEA, Fidelity International:

Thomas McHugh, CEO and co-founder, FINBOURNE Technology: In 2023, ESG is now the new normal. Investors expect asset managers to generate sustainable returns across multi-asset portfolios. They also expect not just a portion of these investments but the majority of their portfolio, to positively impact on the community and the environment. However, the current status quo of best endeavours approaches and heavily manual workflows, which many firms operate in, particularly in ESG investments and sustainable finance, needs to go. Together with spiralling, operating costs, this way of working poses a considerable risk to both reputation (greenwashing) and human capital (employee burnout). ESG is not an outlier or a problem in isolation. If anything, the ESG data challenge is the epitome of what is wrong with the capital markets infrastructure today. It is all the limitations stemming from a mainframe legacy, compounded into one investment area, that just so happens to have planet-saving consequences. From the aggregation of complex and diverse data sets, and the interpretation of non-standardised reporting frameworks, to a lack of entity-level granularity. And at the heart of it, the fundamental problem we are helping firms to make sense of – understanding and deriving value from their data. Interoperating with the existing systems landscape and giving firms the flexibility to migrate between data models is going to be the number one priority in 2023, if firms are to achieve the resiliency needed to manage climate-related risk, meet stricter ESG regulations, and investor-driven transparency. Importantly, by provisioning clean, interoperable data, firms can seek out emerging opportunities to deliver both meaningful change to our planet and returns to its inhabitants.

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Since launching in February, Sustainable Trading has expanded membership to 50 firms, representing a wide range of participants across the financial markets trading industry.

The addition of BNP Paribas Asset Management and Belgian investment house Degroof Petercam, increases the geographic breadth of Sustainable Trading’s members.

Other member firms include global banks, exchanges, investment managers, broker dealers and trading technology service providers such as Barclays, Liquidnet, Schroders and State Street.

Sustainable Trading best practices have been developed thanks to the collective efforts of its members, covering themes including trading technology infrastructure, environmental business practices, diversity, equity and inclusion, and improved governance practices.

Earlier this month, these practices, which comprise of 34 best practices with 86 individual elements, were approved for distribution to members.

Sustainable Trading stated that as it develops these best practices, it will also establish and oversee a measurement framework to enable members to extract clear and comparable metrics on progress in their delivery of the practices, to allow continuous ESG improvement.

“As we approach the end of our first year, we are delighted to bring on board two major European firms. BNP Paribas Asset Management and Degroof Petercam join our diverse membership network dedicated to driving industry-wide Environmental, Social and Governance change,” said Duncan Higgins, founder and chief executive of Sustainable Trading.

“We look forward to their unique perspectives and expertise as they engage with our working groups and contribute to our best practices programme.”

Emmanuel Blanc, head of sell-side relationship management at BNP Paribas Asset Management added: “We see Sustainable Trading as an important catalyst of change within the value chain of the asset management industry. Joining this organisation will help us to collectively drive change as well as help us to progress the goals of our Global Sustainability Strategy.”

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