Daniel Labovitz, a former head of regulatory policy at the New York Stock Exchange, is trying to turn the traditional stock market blues into a greener one. As CEO of the Green Impact Exchange (GIX), he aims to introduce the first U.S. stock market focused on the more than $50 trillion global green economy.
GIX is expected to begin trading in 2025, subject to approval by the U.S. Securities and Exchange Commission. It’s also a global effort, Labovitz said. Global Finance To list on GIX, the company would need to be listed on another U.S. stock exchange, but he said the company is already in talks with overseas exchanges.
“Discussions are underway with exchanges and brokerages in Europe and Africa about potentially bringing equity-related products, such as American Depositary Receipts and exchange-traded funds, to the U.S. market via GIX,” he said. “The discussions are still in the early stages.”.”
As GIX awaits regulatory approval, Labovitz envisions a future in which saving the planet can be considered a smart corporate finance strategy. The following interview has been edited for length and clarity.
Global Finance: Who is interested in GIX and why?
Daniel Labovitz: We have spoken to hundreds of public companies. From our conversations, it is clear that they understand the logic of sustainability and its importance to their operations and shareholders. Corporate leaders know that a large proportion of investors, employees, and customers care deeply about sustainability and want evidence that companies are not just greenwashing. If a company is perceived as greenwashing, it will be at a disadvantage when competing for top talent and consumers, especially younger generations who are increasingly considering a company’s values as part of their hiring and purchasing decisions. Ultimately, corporate leaders know that they will lose access to sustainability-minded investors who are willing to trade short-term profits for long-term sustainable value growth.
GF: What questions were raised?
Labovitz: One of the controversial questions is whether ESG diverts the attention of directors and management from creating shareholder value. When it comes to the environment, we believe the answer is no. Focusing on sustainability is about maximizing value creation. If management does not think about the impact of climate change on their business model and has no plan to take advantage of the opportunities and avoid the pitfalls that arise from the green economy, the company is not positioned for long-term growth and stability. But getting to that stage is difficult. Companies need to rethink how they govern themselves so that sustainability is a given in every decision. GIX helps companies build the corporate governance infrastructure that proves to investors that they are creating long-term value.
GF: Is there data to back that up?
Labovitz: There is growing evidence that a company’s stock price outperforms the overall market when it focuses on sustainability. For example, a 2022 McKinsey study found that “green leaders” in the chemical market had twice the total shareholder return compared to “green laggards.” A 2023 UK study found that board sustainability committees positively impacted market value. And another study found that a company’s environmental efforts can act as a buffer during market turmoil. In other words, the market agrees that sustainability investments and sustainability-focused corporate governance can improve earnings and reduce volatility. You’d be hard pressed to find a CFO or CEO who says, “no thanks” to either.
CEOs and CFOs love our trading model, which helps businesses across the board by incentivizing market makers to provide liquidity on the exchange. Once the exchange is approved for trading, we plan to apply for SEC approval for a Market Maker Support Program exclusively for GIX-listed companies. This program will reward companies that make upfront investments in the green transition by incentivizing market makers to add liquidity to their listed stocks.
GF: How does the GIX hold companies accountable?
Labovitz: Investors are skeptical of corporate promises, especially around sustainability, as companies frequently abandon ambitious environmental initiatives. This lack of accountability often occurs once public attention fades. But GIX is uniquely positioned to bridge this “trust gap.” We require listed companies to establish a robust governance infrastructure, ensuring that commitments are not just words, but deeply ingrained in the company’s DNA.
GF: Has something similar been done before?
Labovitz: For over 100 years, the core function of the US stock exchanges has been to promote good corporate governance. In the early 20th century, there were few standardized accounting and financial controls within companies, and investors had no right to disclosure from companies. This led to a lot of fraud. To address this, the NYSE told companies that if they wanted their stock to trade on the exchange, they had to adhere to certain corporate governance standards, conduct standardized accounting, and make regular disclosures to investors. As a result, listing on the NYSE became the gold standard for public companies, and when the SEC was formed, it incorporated many of the NYSE’s governance standards into the federal securities laws and regulations that still stand today, 90 years later.
Sustainability reporting is in the same situation as financial reporting was in the early 20th century: a lack of standardization, insufficient mandatory disclosures to investors, and a lot of greenwashing, whether intentional or not. To date, the NYSE and Nasdaq have not adopted corporate governance standards on sustainability, so the GIX is actively working to fill that gap.
GF: How do investors benefit from the GIX?
Labovitz: It is important to note that even when the NYSE was the gold standard for listing in terms of value to investors, it never guaranteed that companies would be profitable, nor did it distinguish winners from losers. What it guaranteed was that investors would have quality, timely and reliable information to make informed investment decisions. The same is true with the GIX and sustainability. Our role is not to distinguish companies as “green” or “non-green”. The GIX listing criteria ensure that companies provide investors with quality, timely and reliable information on their sustainability efforts and performance to make informed investment decisions. Efficient markets require transparent information. The GIX makes it available to investors. It is then up to the market, not the exchange, to allocate capital to where it can be used most productively.
GF: What’s the next step?
Labovitz: Our first goal is to build experience and credibility in launching an exchange and running a dual listing market. This is not an easy task. Several exchanges have tried to launch a primary listing business from scratch but were unsuccessful, so we wanted to learn from their examples.
The timeline for launch is dependent on the SEC accepting GIX’s Form 1 national securities exchange registration filing. Once accepted, it will take approximately five to six months to complete all pre-launch activities that cannot be completed by then, which would allow the company to begin trading in the first half of 2025.
Once launched, we will be able to better evaluate what to do next, which may include listing green derivative products (ETFs, ETNs, index products, ADRs) or creating a market for innovative green equity products. Whatever direction we take, we promise to keep you informed.
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