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Bjørn Sibbern, Nasdaq's President of European Markets, on ESG, Brexit, and expanding...

"ESG, Europe is a few years ahead of the US on ESG, but when it comes to the cloud..."

Think “Nasdaq” and it’s likely you’ll think of the hubbub of New York City. The company launched the world’s first electronic stock market there back in the early 1970s and few brands are quite so redolent of the Big Apple. Yet Nasdaq has a long-standing European presence too, with a particular strength in the Nordics and Baltics, where it operates seven equity exchanges, a securities depository, one commodities exchange and one clearing house.

As the only exchange group to operate regulated equities markets in both the US and Europe (where over 1,000 companies are listed on its exchanges), Nasdaq is aiming to boost its footprint as a pan-European financial services, data, and technology provider. The man in charge of that drive is Bjørn Sibbern, President of European Markets – appointed in 2019, and previously the US-based Head of Global Information Services.

With a mandate to create new opportunities in Nasdaq’s European arena, his priorities have included building up Nasdaq’s burgeoning ESG proposition; whether by delivering ESG data to raters, investors, and stakeholders, helping listed companies make it easier to disclose their ESG-related data, or growing Nasdaq’s Sustainable Debt Market database -- which lists green, social and sustainability bonds, as well as sustainability-linked bonds. That focus has been given huge momentum by the Sustainable Finance Disclosure Regulation (SFDR), which came into force in Europe on March 10.  The Stack sat down to speak with Bjørn Sibbern to learn more.

What were your early key tasks after coming over from NYC?

We have a fantastic business in Europe. [But] more than 90% of the business revenue we have in Europe is based on what we do in the Nordics. One of the key focus areas for us is growing from the Nordics into Europe in targeted areas; we have many opportunities to grow our business.

To give you a couple of examples: we are the leading exchange for SME listings in Europe, and it’s not only SMEs in the Nordics that come to us; it’s also other European SMEs.

We are growing fast in the ESG space. One of our latest offerings is the Nasdaq Sustainable Bond Network. Working out of Europe, we gather data –  from Asia, Europe, the US; all around the world – on sustainable bond allocation, certifications, frameworks, impact, frameworks and distribute it to global clients. Because today, as an investor wanting to invest in sustainable bonds, you often need to sit and look at a PDF.

Nasdaq Sustainable Bond Network helps the bond issuers. And also means they are suddenly visible to all the buy side community. So improving our data gathering and distribution is a big part of what we are doing – and of course using our core competencies in data distribution, technology, and more.

There’s a lot of market noise and froth around ESG. What does it look like actually at the coalface? Where’s the *real* buy side interest and what’s the revenue model?

Let me give you a couple of examples, as from a Nasdaq point of view, we’ve seen some areas move really fast on the back of customer demand. For example we were the first exchange in the world to deliver an ESG version of our leading index in the Nordics, the S30 index in Sweden. That was because we had larger institutional investors saying we cannot and will not – because of our ESG focus – trade in the main index any more. That’s grown fast. The ESG version is now about 10% of all trading in that main index.

Then we have some areas where we're trying to take the lead.

For example we believe that retail investors, when they invest in equities in the future, they will not only look at the historical performance, revenue outlook etc. of the company, they will also look at ESG results. So now we have teamed up with a small Danish startup called Matter that helps scoring portfolios from an ESG point of view. So let's say you have 15 shares in your portfolio; if your broker buys the service from us, you will be able to get a score on your portfolio. e.g. My overall portfolio currently has this score. If I sell this share, buy this one, my ESG score will be X. That’s an area where we want to be really drive and take the lead on a future product.

ESG data remains a very chaotic space: it’s inconsistent; a lot of the data is stale; very little of it is machine readable. That seems to be a very live issue for a lot of people. What are your views?

You’re spot on with some of those challenges. And there’s a lot of companies out there trying to gather data and distribute data... The centre of what we do is focussed on supporting corporates with their ESG needs.

What do I mean by that? So we have over 4,000 listed companies on Nasdaq exchanges.

We’re supporting them with OneReport. The idea of this is to help support their reporting and workflow solutions for ESG – particularly with so many ratings agencies needing their data. OneReport is a platform that streamlines the data gathering and response processes: it basically helps the listed companies to report their data in a better and more structured way to ratings agencies or other stakeholders. Because it’s super complicated for corporates right now. There’s a strong need for some kind of standardisation on ESG reporting in the market.

But if look at Nasdaq, we have a fantastic brand. We have global leadership on listings, we have a super strong position around data gathering and data distribution. Here in the Nordics we have over 1,000 companies listed and 600 of those companies voluntarily upload their ESG scores to Nasdaq. They do that because they are listed with us, they are used to working with our technology, and uploading the ESG data to us is easy. So now we’re building a product that distributes that data to stakeholders where they want it – for over 50% of the market.

Tell us more about your plans to broaden your European footprint.

When you are looking at strategy you have to focus on what you want to do and also want you don’t want to do. For example, we do not have a strong proposition providing trading solutions for shares in Greece and that’s not a business we want to be in. But we have a strong solution in trading equity derivatives.

Our view is growing into Europe in targeted areas. We are planning to launch pan-European offerings within equities derivatives while making sure what we leverage and develop our Nordic Clearing House to stand ready for the opportunities that an ever-changing market landscape offers.

ESG is certainly a key area and we aim to leverage what Nasdaq has already built here, much of it coming out of our European business, to further build out ESG solutions and services for investors and corporates to form a world-leading marketplace for sustainability, both within traditional and non-traditional asset classes. I, for example, believe that trading different carbon offset products will become increasingly important as companies take more and more responsibility for the environment and the societies they operate in – we call it inclusive capitalism.

Tell me a little more about your technology investments in Europe, because you’ve been quite an acquisitive company on that front…

Two years ago when I moved back to Europe, we made an acquisition of Cinnober , a Swedish company that is particularly strong on clearing technologies. Cinnober was a great match for our core technology business. Remember that Nasdaq technology provides solutions for more than 130 exchanges and marketplaces around the world; either for the matching engine, surveillance or other parts of the technology.

Verifin, which we announced late last year, was the second-largest acquisition with have done with Nasdaq and helps on our journey to being a leading SaaS provider. Again, we are very strong and focused on regulatory technology, so Verifin’s is a great match towards our overall strategy

From a data point of view our biggest product is US equity data. We have lots of companies who want to get that into the cloud, whether that is high-frequency traders or tech companies. We aim to always stand in the forefront of technology shifts and if trading is moving into the cloud, we want to be the preferred market operator for that shift – and we stay extremely close to our clients to assess their needs and appetite for such a transition before making any changes. We already offer some of our data products in the cloud today   I think that when it comes to ESG, Europe is a few years ahead of the US, but when it comes to the cloud, the US is a few years ahead, so that’s a journey we have started on.

Finally, what impact did you see from Brexit across your European business?

We spent a lot of time preparing to support our customers on Brexit. And if you look at equity trading, for example, more than 50% of the trading done in the Nordics comes from banks and brokers in the UK. So to take one of the big global banks as an example, they get some flow from pension funds in the US, but they also get some flow from pension funds in Sweden. But this flow comes to through banks and brokers in the UK.

So the priority was making sure the day after Brexit banks and brokers out of UK could continue to trade as they did before, which we successfully did – and we saw our market share increasing because it was so easy for them to carry on trading in Sweden, or Finland, or Denmark. I think the industry has actually done a super job of making sure that the Brexit transition worked smoothly for the buy-side and sell-side.

And of course Brexit gave us some opportunities – for example with companies choosing [listing in] Sweden (over the AIM) and a trend we are seeing of moving some clearing products like swaps from the UK into Sweden.

But London as a financial centre is strong: no city can just come in and replace it. It will continue to have a very strong presence.

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