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ESG Newsletter published on April 12, 2019

In Pursuit of Sustainability Standards

In 2011, Jean Rogers founded the Sustainability Accounting Standards Board (SASB) to establish standards for decision-useful, financially material and comparable sustainability metrics for corporations in their communication with investors. Rogers built SASB on the premise – supported by research1 – that industry-specific metrics are necessary for the investment community to effectively assess a company’s sustainability performance. In this article, we highlight recent milestones for SASB.

Codification of Standards

In November 2018, SASB completed a six-year effort to publish codified sustainability standards across 77 industries. The development process included in-depth discussions with thousands of market participants, including a balanced representation of companies, investors, public-interest groups and intermediaries. SASB intends to update the standards using the process depicted in Figure 1. The review cycles will each last roughly three to four years, and updates will include SASB’s own research on sustainability topics as well as public input on proposed updates to the standards. The Standards Advisory Group (SAG), composed of industry experts, will help aggregate ideas from various stakeholders and review the standards to monitor their relevance to market trends over time.

Expansion Beyond 10-K Reporting

SASB standards have attracted significant interest from investors and a growing number of companies worldwide. Yet there is the perception by some that the standards are applicable only to U.S. issuers, a view that grew in part from SASB’s original stance on disclosure locale.

That stance focused squarely on the disclosure of financially material environmental, social and governance (ESG) information in SEC filings (i.e. forms 10-K, 20-F and 40-F). This resulted in many issuers not listed in the U.S. surmising that the standards were not applicable to them. U.S. issuers also voiced concerns about the challenges of disclosing ESG metrics in audited financials, as systems of internal control over such information can be less mature compared to well-established systems for the compilation and reporting of financial information. Through its standards development process, and by following feedback from investor engagements with companies on the use of SASB standards, it became clear that investors simply wanted higher-quality information on sustainability-related performance and were generally less concerned about the location from which that information was disclosed.

Beginning in 2018, SASB softened its stance on disclosure locale and now encourages U.S. and non-U.S. companies (public and private) to report using SASB disclosure topics and metrics in their communications with investors. This can include annual reports, integrated reports, investor relations sections of company websites and stand-alone SASB reports. In addition to these cases, many companies are including SASB disclosure tables in corporate social responsibility and sustainability reports (CSRs). To ensure quality, SASB recommends that the companies use the same level of rigor and internal controls as used for traditional financial measures when reporting sustainability-related performance to investors.

Looking Forward: Action to Combat “Survey Fatigue”

In November 2018, SASB joined four other reporting frameworks to align their metrics. The CDP, Climate Disclosures Standard Board, Global Reporting Initiative, the International Integrated Reporting Council and SASB launched an initiative, called the Better Alignment Project, to support alignment and usability among the frameworks and to counteract what corporations call “survey fatigue.” The project is a two-year initiative. In the first phase, each organization will map their frameworks against the recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD).

Investor Advisory Group Corporate Engagement

Launched in 2016, SASB’s Investor Advisory Group (IAG) is composed of asset owners and asset managers supportive of SASB’s mission. One of the IAG’s objectives is to promote the use of SASB-based reporting through an engagement initiative to advocate for this directly with companies.

In a positive development, due in part to this effort, companies are starting to use SASB in their communications with investors. Many companies adopted the practice in 2018 and nearly 50 companies are now SASB reporters. SASB maintains a list of the reporters here. When viewing the list, it is important to note the following:

  • The method of communicating SASB metrics differs among companies, as certain issuers include the recommended information in an SEC filing while others use a range of investor-focused communications or their CSR report.
  • The quality of disclosure varies, from partial to full alignment relative to the SASB standards.
  • The method by which information is presented has varied, and has included data tables with metrics as well references to external documents or web pages.

In our opinion, an example of a thoughtful SASB report is Waste Management’s SASB Index. The report features disclosure of sustainability metrics for all SASB standard topic areas for the industry, as well as links to the relevant pages in 2018 Sustainability Report, where more information is provided. In addition, Breckinridge provided our own SASB index in our 2018 CSR report. We believe that the number of SASB reporters will continue to grow, given that the standards have been codified, and given information we have gathered from corporations during our engagement calls.

Breckinridge Is a Longstanding Supporter of SASB

Breckinridge has been a longstanding supporter of SASB’s mission. We are members of the SASB Alliance, IAG and SAG. In addition, Breckinridge reports SASB metrics. In terms of our investment research, four Breckinridge research analysts have earned the FSA Credential, and SASB’s sustainability topics and metrics inform our corporate ESG analysis. We are excited to continue our partnership to encourage widespread adoption of their standards.


[1] The white paper From Transparency to Performance was published in 2010. Steve Lydenberg is partner at Domini Impact Investments and CEO of The Investment Integration Project, and David Wood is director of the Initiative for Responsible Investment at the Harvard Kennedy School. The paper is available here.  


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