Daniel Labovitz, the former NYSE head of regulatory policy, is swapping the traditional stock market blues for a greener pasture. As the CEO of the Green Impact Exchange (GIX), he aims to introduce the first US stock market exclusively focused on the $50 trillion-plus global green economy.
If GIX gets the green light from the US Securities and Exchange Commission, it plans to kick off trading in 2025. And it’s a global initiative, too. Labovitz tells Global Finance that while a security must be listed on another US exchange to list with GIX, he’s already chatting up counterparts abroad.
“Conversations with exchanges and broker-dealers in Europe and Africa” about potentially bringing equity-linked products, i.e., American Depositary Receipts and exchange-traded funds, from those regions to the US markets via GIX are taking place, he explained. “We’re still in the early stages of those discussions.”
As GIX waits for regulatory approval, Labovitz is mapping out a future where saving the planet is thought of as a savvy corporate finance strategy. The following interview is edited for length and clarity:
Global Finance: Who’s expressing interest in GIX and why?
Daniel Labovitz: We have spoken with hundreds of public companies. From our conversations, it’s clear that they understand the logic and importance of sustainability to their business and their shareholders. Company leaders know that significant portions of their investor base, employees, and customers care deeply about it and are looking for evidence that companies are not just greenwashing. If a company is perceived to be greenwashing, it puts them at a disadvantage when competing for the best talent and consumers—especially younger cohorts, who, more and more, are considering a company’s values as part of their employment and purchasing decisions. Ultimately, company leaders know they will lose access to sustainability-minded investors willing to trade short-term gains for long-term sustainable value growth.
GF: What were some of the questions that get brought up?
Labovitz: One of the polarizing questions that comes up is whether ESG diverts board members’ and management’s attention away from shareholder value creation. When it comes to the environment, we think the answer is “no.” A focus on sustainability is about maximizing value creation. If management isn’t thinking about the impact of climate change on their business models and aren’t planning for how to take advantage of opportunities and avoid the pitfalls that arise out of the green economy, then they’re not positioning the company for long-term growth and stability. Getting to that point, however, can be challenging. It requires companies to rethink how they govern themselves to ensure that sustainability is considered a matter of course in any decision. GIX will help companies build that corporate governance infrastructure, which proves to investors that they are creating long-term value.
GF: Is there data to support that?
Labovitz: There is growing evidence that focusing on sustainability leads to the company’s stock outperforming the broader market. For example, a 2022 McKinsey study found that “green leaders” in the chemicals market doubled their total shareholder return compared to “green laggards.” A 2023 study in Britain found that a board sustainability committee positively impacted market value, while a separate study found that corporate environmental commitments can play a buffering role during disruptive market events. In other words, markets agree that sustainability investments and sustainability-focused corporate governance can improve returns and lower volatility. You’d be hard-pressed to find a CFO or CEO who said “no, thank you” to either.
CEOs and CFOs also like our trading model. It will help companies generally by incentivizing market makers to post liquidity on the exchange. Once the exchange is approved for trading, we plan to seek SEC approval for a market maker support program specifically for GIX-listed companies. That program would reward companies for making up-front investments in green transition by incentivizing market makers to add liquidity in listed stocks.
GF: How does GIX hold companies accountable?
Labovitz: Investors develop skepticism toward company promises, particularly in sustainability, due to the frequent abandonment of ambitious environmental commitments. This lack of accountability often occurs once the public attention wanes. GIX, however, is uniquely positioned to bridge this “trust gap.” We mandate our listed companies to establish a robust governance infrastructure, ensuring that their promises are not just words but deeply embedded in the company’s DNA.
GF: Has something similar been done before?
Labovitz: Incentivizing good corporate governance has been a core function of stock exchanges in the US for more than 100 years. In the early 20th century, there were little standardized accounting or financial controls inside companies, and investors were not entitled to the right to receive disclosures from the company. This allowed a lot of fraud to thrive. To combat this, the NYSE told companies that if they wanted their stock to be traded on the exchange, the company would have to abide by specific corporate governance standards, implement standardized accounting, and commit to regular disclosures to investors. As a result, an NYSE listing became the gold standard for public companies, so much so that when the SEC was formed, it incorporated many of the NYSE’s governance standards into the federal securities laws and rules that we still live with 90 years later.
Sustainability reporting is in a place where financial reporting was in the early 20th century. There is a lack of standardization, insufficient mandatory disclosures to investors, and a lot of greenwashing, whether unintentional or otherwise. To date, the NYSE and Nasdaq have not adopted corporate governance standards for sustainability, so GIX is stepping up to address that gap.
GF: How do investors benefit from GIX?
Labovitz: Regarding value for investors, it’s important to note that even when it was the gold standard for listings, the NYSE never guaranteed that a company would be profitable and did not anoint winners and losers. To the extent it guaranteed anything, it was that investors would get quality, timely, reliable information from which they, the investors, could make informed investment decisions. The same applies to GIX and sustainability: our role is not to anoint companies as “green” or “not green.” GIX’s listing standards ensure companies give investors quality, timely, and reliable information about sustainability initiatives and performance so they can make informed investment decisions. Efficient markets need transparent information; GIX ensures investors get it. After that, it’s up to the market—not the exchange—to allocate capital where it will be most productively used.
GF: What are your next steps?
Labovitz: Our first goal is to launch the exchange and build experience and credibility running a dual listing market. It’s not a small task—several exchanges have tried to launch a primary listing business right out of the gate and not succeeded, so we wanted to learn from those examples.
The timeline for our launch depends on securing SEC approval of GIX’s Form 1 application for registration as a national securities exchange. After approval, we will need approximately five to six months to complete all the pre-launch work that can’t be done until then. That puts us on track to launch trading in the first half 2025.
Once we launch, we’ll be better positioned to evaluate what’s next, including listing green derivative products: ETFs, ETNs, index products, and ADRs, and creating markets for innovative green equity products. Whichever way we go, we promise to keep you posted.