sustainability accounting standards board
TRANSCRIPT
© SASB
Sustainability Accounting Standards Board
Matthew Welch
President & COO
Neil Stewart
Director of Corporate Outreach
Presentation for G100
5 June, 2020
77 industry-specific
disclosure standards
Used by companies
and investors globally
SASB connects businesses
and investors on the financial
impacts of sustainability
The Sustainability Accounting Standards BoardNon-profit standards-setting organization for financially material ESG information
6/3/2020 © SASB2
Governance and Oversight
Governance structure safeguards the independence and integrity of standard-setting
6/3/2020 © SASB3
Standards Oversight
Committee (SOC)
Oversight of due process of
standard-setting activities
Governance & Nominating
Committee
Nominates members for appointment to
the Sustainability Accounting Standards
Board by SASB Foundation Directors
THE SUSTAINABILITY ACCOUNTING STANDARDS BOARD
SASB FOUNDATION BOARD OF DIRECTORS
Advisory Groups or ad hoc
Advisory Committees (external
advisors) who provide input on
practical and technical issues
4
The SASB DifferenceSASB standards created for the market, by the market
Decision-Useful
Cost-Effective
Financially Material
Industry-Specific
Evidence-Based
Market-Informed
6/3/2020 © SASB
5
The Non-Financial Information and Analytics LandscapeA complex and thriving landscape with many non-profit and for-profit providers playing different roles
SASB / TCFD / CDSB / GRI / Bloomberg /
MSCI / CDP / TruValue Labs / RepRisk /
Sustainalytics / Refinitiv / DJSI / FTSE4Good
DISTINCT GROUPS:
ORGANIZATIONS
2 Request data from
companies via
questionnaires
MULTIPLE
4FIT IN
1 Publish guidance
for voluntary
disclosure, often with
company feedback
loops
3 Aggregate
publicly-available
data from companies
6/3/2020 © SASB
4 Create assessments of
companies based on public
and/or private information to
sell to investors
6
Standards Make Frameworks Actionable and Help Achieve
Key Success Factors for Non-Financial Reporting
FRAMEWORKSA set of principles-based guidance for “HOW” information is
structured and prepared, and for what broad topics are covered
TCFD IIRCCDSB
STANDARDSSpecific, replicable and detailed requirements for “WHAT”
should be reported for each topic
Framework: Example of climate
disclosure guidance
Discuss strategic planning process related to
GHG emissions, including the use of
scenario analysis.
Standard: Example of climate
disclosure guidance
For an oil & gas company, disclose
carbon dioxide emissions embedded in
proved hydrocarbon reserves.
RAPIDLY ADAPTABLE
as issues evolve
A COMMON LANGUAGE
for companies, investors
and stakeholders
Allow for COMPARABLE and
CONSISTENT INFORMATION
across companies
Can be assured,
PROVIDING RELIABLE
INFORMATION
Can be TAILORED
BY REGULATORY
JURISDICTIONS, providing
flexibility and consistency
Developed using
TRANSPARENT,
INCLUSIVE DUE
PROCESSES
SASB GRI
6/3/2020 © SASB
Disclosure standards are a
powerful tool to ensure high
quality non-financial disclosure
6/3/2020 © SASB7
SASB Enables Robust TCFD ImplementationIndustry-specific metrics and targets provide actionable information on climate risk
Governance
Strategy
Risk
Management
SASB metrics are
among the most
frequently referenced
tools cited by TCFD
for implementing its
recommendations
Metrics and targets
are critical to more
effective governance,
strategy, and risk
management – the
“outer layers” of the
TCFD “onion”
Metrics
& Targets
8 6/3/2020 © SASB
InvestorsBroadest Range of
Stakeholders
Sustainability
Report
Investor
Communications
Relevant Information
All environmental, social,
and governance topics of
interest to a wide range of
stakeholders
Financially Material &
Industry-Specific Data
Non-financial factors reasonably
likely to affect the financial
condition or operating
performance of a company
Complementary StandardsGRI and SASB are key building blocks to implement the EU’s concept of dual materiality
9
“…This year, we are asking the
companies that we invest in on
behalf of our clients to: (1) publish a
disclosure in line with industry-specific
SASB guidelines by year-end…”
“…leveraging the Sustainability Accounting Standards
Board (SASB) materiality framework, R-Factor … allows
us to evaluate a company’s performance against both
regional and global industry peers …
… Beginning this proxy season, we will take appropriate
voting action against board members at companies in
the S&P 500, FTSE 350, ASX 100, TOPIX 100, DAX 30,
and CAC 40 indices that are laggards based on their R-
Factor scores… ”
Source: Morrow Sodali 2020 Institutional Investor Survey
6/3/2020 © SASB
Investor Demand
Recent, Targeted Calls from Large Asset Managers for SASB Disclosure
10
➢ ~$40 Trillion in assets
➢ 20 investors from 7 countries joined the IAG in 2019, nearly
doubling the size of the group
➢ 8 of the world’s 10 largest asset managers* are IAG members
Investor Advisory Group (IAG)
➢ 50+ members
➢ Representing 12 countries
Support for SASB Among Investors is Strong and Rapidly Growing
Updated March 2020
• Norway
• Swedem
• Switzerland
• The Netherlands
• UK
• US
• Australia
• Canada
• Denmark
• France
• Germany
• Japan
* Largest asset managers as of March 2019 per https://www.advratings.com/top-asset-management-firms.
6/3/2020 © SASB
11
Investors Are Integrating ESG Using SASB Standards
• 100+ entities license the SASB standards to
incorporate the standards into tools and processes
that support investment decisions.
• SASB’s ESG Integration Insights series now
includes 18 investor-written case studies,
demonstrating how investors use the SASB
standards across public equity, private equity, and
fixed income.
• SASB’s Engagement Guide is used by asset
owners and asset managers to guide discussions
with company directors and management on
sustainability issues.
• Proxy advisor Glass Lewis uses the SASB
standards to inform and explain its voting
recommendations for clients.
6/3/2020 © SASB
Myths About SASBAs an emerging practice, sustainability accounting confronts many misconceptions
Myth: SASB standards are only relevant to US companies
Reality: Companies and investors around the world use SASB standards to identify,
manage, and communicate about the financially material sustainability risks and
opportunities they face.
Myth: SASB standards compete with GRI standards
Reality: SASB and GRI are complementary, as evidenced by the many companies that
use both in their reporting. They fulfill different purposes and are targeted at different
audiences. SASB is focused solely on investors, while GRI is designed for use by a
range of different stakeholders, including investors.
Myth: SASB-based reporting must go in regulatory filings
Reality: Companies communicate with investors in many ways—including in annual
reports to shareholders, integrated reports, sustainability reports, stand-alone SASB
reports, regulatory reports, and on investor relations websites—all of which may be
appropriate channels for using SASB standards.
5/14/2020 © SASB12
Myths About SASB (continued)As an emerging practice, sustainability accounting confronts many misconceptions
Myth: Companies must disclose every topic and metric in their industry standard(s)
Reality: A company determines for itself which SASB standard or standards are
relevant to the company, which disclosure topics are financially material to its business,
and which associated metrics to disclose. SASB’s Standards Application Guidance
recommends that when a company omits or modifies a SASB metric, it discloses its
rationale for doing so.
Myth: SASB rates companies
Reality: As an independent standard-setter, SASB does not rank, rate, or evaluate
companies on their sustainability performance.
Myth: SASB is only useful for publicly listed companies
Reality: Because the issues covered in SASB standards are closely linked to financial
fundamentals, the standards can be (and are) used by both public and private
companies and are also used by investors across a full range of public and private asset
classes, including equities and fixed income.
5/14/2020 © SASB13
14
Different Standards for 77 Industries
Across 11 Sectors (SICS®)
▪ Consumer Goods
▪ Extractives & Minerals Processing
▪ Financials
▪ Food & Beverage
▪ Health Care
▪ Infrastructure
▪ Renewable Resources & Alternative Energy
▪ Resource Transformation
▪ Services
▪ Technology & Communications
▪ Transportation
A Total of 26 ESG Sustainability-related
Business Issues Across Five Dimensions
Each SASB Industry Standard has an average of just
6 topics and 13 metrics
Business Model & Innovation
Social Capital
Human Capital
Leadership &
Governance
Environment
UNIVERSE OF
SUSTAINABILITY
ISSUES
SASB metrics are aligned with over 200 existing
frameworks, regulations, and certifications
6/3/2020 © SASB
15
Inclusion in SASB Standards Requires Evidence of BOTH
The SASB Approach to Financial MaterialityStandards targeted to the needs of investors for financially relevant ESG information
Investor Interest in an issueFinancial impact of that issue
on companies in an industry
Identifies ESG factors reasonably likely to affect
the financial condition or operating performance of
companies within an industry
AND
SASB’s Process
SASB Standards
6/3/2020 © SASB
6/3/2020 © SASB16
materiality.sasb.org
VISIT
SASB’s Materiality Map®
No Two Industries Are AlikeSASB standardizes disclosure on the business-critical ESG issues for each industry
5/14/2020 © SASB17
Sustainability Dimension
Environment
SICS Industry
Non-Alcoholic
Beverages
SICS Industry
Software & IT
Services
General Issue Category
Disclosure Topic
Accounting Metric
Water & Wastewater
Management
(1) Total water withdrawn, (2) total
water consumed, percentage of each
in regions with High or Extremely High
Baseline Water Stress
Energy Management
Water ManagementEnvironmental Footprint
of Hardware Infrastructure
(1) Total energy consumed, (2)
percentage grid electricity, (3)
percentage renewable
Example: Environment dimension in Beverages vs. Software
No Two Industries Are AlikeSASB standardizes disclosure on the business-critical ESG issues for each industry
5/14/2020 © SASB18
Sustainability Dimension
Human Capital
SICS Industry
Oil & Gas – Exploration
& Production
SICS Industry
Asset Management &
Custody Activities
General Issue Category
Disclosure Topic
Accounting Metric
Employee Health & Safety
(1) Total recordable incident rate (TRIR), (2)
fatality rate, (3) near-miss frequency rate
(NMFR), and (4) average hours of health, safety
and emergency response training for (a) full-
time employees, (b) contract employees, and (c)
short-service employees
Employee Engagement,
Diversity & Inclusion
Workforce Health & SafetyEmployee Diversity &
Inclusion
Percentage of gender and racial/ethnic group
representation for (1) executive management,
(2) non-executive management, (3)
professionals, and (4) all other employees
Example: Human Capital dimension in Oil & Gas vs. Asset Management
19
Accounting metrics
Technical protocol
for compiling data
Activity metrics
for normalization
Industry-specific disclosure topic
6/3/2020 © SASB
Robust Standards Designed to Provide Decision-Useful InformationSASB standards contain industry-specific disclosure topics, metrics, and guidance
Reporting Channels
Location is less important than information quality
20
SASB Report
Regulatory Filing
Integrated Report
Sustainability Report
6/3/2020 © SASB
Examples of SASB Metrics and References Tables
Facilitates access to data for investors
21 6/3/2020 © SASB
0 50 100 150 200 250
United States
Canada
Europe
Asia Pacific
Latin America & the Caribbean
Middle East & AfricaYTD 2020 2019
2018 2017
2016 2015
Increasing Corporate Use
Hundreds of leading firms use SASB standards to guide investor communications
6/3/2020 © SASB22
Growth in SASB References by region 2019
Updated March 2020
• 600+ references in 2019
• 62% domiciled outside the U.S.
References are often a leading indicator of future reporters.
SASB References
2019
Non-U.S.
62%
U.S.
38%
Number of unique reporters since 2018: 219 (as of April 30, 2020)
23
UNIVERSE OF
ESG ISSUESSUSTAINABILITY
ISSUES
Industry Research
Market Input
Evidence VettingStandards Board Review
Public Comment
Revisions & Board
Approval
Standards
maintenance
Ongoing
Rigorous Process Drives Quality of SASB StandardsStandards for each industry are rooted in evidence and shaped by market input
Industry Working Groups and Issuer,
Investor Consultation
Evidence of Financial Impacts
Exposure Drafts
SASB
Standards
6/3/2020 © SASB
77 industry-specific disclosure
standards
Average of 6 disclosure topics
and 13 metrics per industry
6/3/202024 © SASB
Plastics Risks and Opportunities
(Pulp & Paper, & Chemicals
Industries)
Standards Enhancement Projects Underway
Conceptual Framework
Rules of Procedure
Human Capital
Content Moderation on
Internet Platforms
Systemic Risk in Asset Management
Tailing Management in Extractives
Measuring Performance on Raw
Materials Souring (Apparel,
Accessories & Footwear Industry)
Supply Chain Management in the
Tobacco Industry
Alternative Meat & Dairy in Food &
Beverage
25
Getting Started
Download your standard(s) https://www.sasb.org/standards-overview/download-
current-standards/
Step-by-step guidance and exampleshttps://www.sasb.org/implementation-primer/
Materiality Map®
materiality.sasb.org
Questions?
June 3, 16 and 26 with speakers including MOL Group,
Franklin Templeton, JetBlue and EYhttps://info.sasb.org/implementation_primer_webinars
6/3/2020 © SASB
© SASB