Be the change

November 20, 2018
June 2018

Dr. Jean Rogers is the founder of the Sustainability Accounting Standards Board (SASB). Established in 2011, SASB is an independent, private-sector standard-setting organization that aims to enhance the efficiency of the capital markets by fostering high-quality corporate disclosure of material sustainability information that meets investor needs. SASB’s work is overseen by the SASB Foundation Board of Directors, which is led by Chair Emeritus Michael R. Bloomberg, the former mayor of New York City; Chair Robert K. Steel, the CEO of Perella Weinberg Partners, a global advisory and asset management firm; and Vice-Chair Mary Schapiro, the former Chair of the U.S. Securities and Exchange Commission. During its provisional standard-setting work, SASB engaged with more than 2,800 experts, representing $23.4 trillion in assets under management and more than $11 trillion of market capitalization. More recently, deep consultation on the provisional standards included 141 companies (representing $7.5 trillion of market cap) and 19 industry associations (representing hundreds of companies). Additionally, the SASB’s Investor Advisory Group (IAG) comprises 32 organizations, managing $26.2 trillion in assets, including BlackRock, CalPERS, CalSTRS, State Street Global Advisors, and others. Sustainability accounting standards for 79 industries across 11 sectors will be codified this summer for use by companies and their investors.

What inspired you to found the Sustainability Accounting Standards Board?

It was not a decision I took lightly; rather, it grew out of a long journey. I was helping international companies measure their environmental impacts, guiding them on how best to integrate sustainability into their strategy and operations. It became clear that firms were using varied metrics to address challenges unique to their own industry. So, I collaborated with researchers at Harvard University [Steve Lydenberg and David Wood, from the Kennedy School’s Initiative for Responsible Investment]. Our team conducted research by industry to see if the same metrics could be applied across the board, or if they needed to be industry-specific. We laid out a blueprint in our 2010 report, From Transparency to Performance. It received an incredible level of investor interest, because for the first time sustainability issues were presented as business drivers and industry factors. Steve Lydenberg argued that the work should not remain on the shelf, but needed to lay the foundation for an institution serving the capital markets in order to have the greatest impact. He suggested that we review the structure of the Financial Accounting Standards Board (FASB), and consider how a similar approach might be applied to sustainability information. Around the same time, an investor approached us to fund such an initiative. I had my doubts about how to start, but while I was driving home one day, I found myself behind a car with a “Be the Change” sticker on its bumper. That’s when I decided that if I wanted to see the potential of SASB realized, I had to take it forward. We began by mapping issues to industries. While some issues are universally applicable, such as climate risk and human capital issues, others are rather unique to specific industries such as the distinct challenges faced by oil and gas companies, banks, and others. We designed our process to identify and validate the environmental, social, and governance factors most likely to have material financial impacts across every major sector of the economy.

What does “success” look like?

What is unique about SASB is that, for the first time, capital markets have standards they can use to benchmark performance on material sustainability issues. Asset allocators can evaluate risks within a sustainability framework, characterize the nature of those risks, and price them accordingly. Analysts view these issues as quantifiable factors; as such, they can incorporate them into models and present them in a tangible way. SASB finalized its first set of sustainability accounting standards for 79 industries in June 2017. We have been refining them based on market feedback since then. Naturally, they will continue to evolve as social and environmental issues are brought to the forefront. Success will be reflected by the quality and accessibility of information – for example, having comparable, consistent, and reliable sustainability fundamentals sitting right alongside financial fundamentals and being able to invest accordingly. After all, investors shouldn’t be spending their time gathering data, they should be evaluating it and using it to assess risk and identify opportunities. SASB conducts significant research into how well companies are communicating their performance on sustainability issues in their investor filings. We conduct and publish an annual analysis of disclosure quality, and we anticipate a ramp-up now that standards are available.

How can we encourage companies to report more of this information?

It’s not so much about getting companies to report more information; it’s about getting them to report better information. It’s an issue of quality, not quantity. Contrary to popular belief, SASB wants the burden of reporting immaterial items to be reduced. Reporting well on a few material topics minimizes the need to provide information to investors in questionnaires and may also mitigate shareholder proposals, which is currently how this information changes hands. Companies increasingly understand the materiality of these issues, and that investor demand is not abating.  Investors are increasingly concerned about material environmental, social, and governance (ESG) factors, not just because they care about their environmental and social impacts, but because these factors provide crucial insight into how effectively a company is being managed to deliver long-term value.   Beyond the pure financial data, intangibles such as intellectual capital, brand value, overall footprint, and reputation are increasingly important components of corporate valuations. In addition, companies and their investors are exposed to risks from high-impact ESG-related events, such as safety incidents, ethics scandals, or natural resource shortages. Today, both asset owners and managers view ESG factors as a means of meeting or exceeding their return targets while managing risks and opportunities more holistically. As a direct consequence, SASB has witnessed a significant market shift in the past 18-24 months –  from primarily sustainability-focused investors caring about these issues, to mainstream investors adopting this approach. For example, Vanguard, Fidelity, State Street, BlackRock, and others have become more vocal about the importance of ESG, including through their proxy voting, their direct engagement with portfolio companies, and by sending open letters to corporate boards and executives. SASB’s work is as much a response to these trends as it is a cause of them, but our efforts and those of investors have evolved side by side in a mutually supportive way. Both institutional investors and some retail investors now view these issues as critical indicators of a company’s ability to create value over the long term. As a result, they not only have a desire to see these factors reflected in their portfolios, they believe it is part of their fiduciary responsibility to do so. SASB provides the infrastructure to make those objectives actionable.

How is SASB getting investors to insist on more—or, should we say, better—reporting on these issues?

The investors are the ones really driving this, so we don’t exactly have to twist their arms. They continue to put pressure on their portfolio companies more or less regardless of what SASB does. But they do support us and we’ll continue to engage with them as we move forward. The standards will be codified and ready for use this summer, after which we expect to see them incorporated into the next cycle of financial reporting. If our due process is as good as we believe it is, and our standards therefore hit financial materiality spot-on, there should be no issue with market uptake, because investors and companies intrinsically care about financial materiality. We anticipate this will drive competition and improve performance. Although SASB doesn’t define what “good” or “bad” performance looks like on an issue, investors have their own strong opinions and that’s their role – demanding more effective disclosure so that they can better evaluate performance. That said, we do encourage investors to be more vocal with the SEC. They have a right to material information, regardless of whether it is financial data or sustainability data. In the U.S. — as in many other countries — we don’t need any new legislation or regulation for this to happen, as there is already a law in place requiring the disclosure of material information. Rather, we need support and moral persuasion. Overall, it’s encouraging to see the SEC’s commitment to better understanding the materiality of these issues, and its support for a close collaboration with SASB. Speaking of international markets, corporate culture certainly plays an important role in sustainability disclosure. For example, European companies tend to disclose more useful information and to do so voluntarily, whereas U.S. companies tend to be more skeptical. However, SASB is designed for this, because everyone can agree on financial materiality.

There is a multitude of standards and metrics. How does SASB fit in with the others and what are its unique benefits?

SASB is the only framework focused solely on the needs of investors – specifically the need for financially material, decision-useful information on industry-specific sustainability factors. Other initiatives, such as the Global Reporting Initiative (GRI), tend to focus on a broader set of stakeholders and thus a broader set of issues. These are complementary efforts, of course, and we work alongside and directly with multiple groups seeking to advance corporate disclosure on sustainability issues – including GRI, the Climate Disclosure Standards Board (CDSB), the International Integrated Reporting Council (IIRC), the Task Force on Climate-Related Financial Disclosures (TCFD), and CDP, among others. It’s fair to say that SASB does not cover everything – our focus on financial materiality is only one piece of the sustainability reporting puzzle. And we recognize that the proliferation of reporting frameworks has created a measure of confusion in the marketplace. We’re committed to improving our alignment with other approaches, better communicating our key differences, and furthering best practices in reporting for the benefit of both companies and investors. The truly unique benefit of SASB is that by focusing on financial materiality, the standards help corporations better manage the subset of sustainability factors that will enable them to achieve the biggest net impact for both their shareholders and for society. It’s a win-win.

Can these standards be applied and expanded internationally?

Absolutely. The idea that the standards are only relevant to U.S. companies is a misconception. SASB’s standard-setting process is guided by the U.S. Supreme Court’s definition of materiality and the standards are designed to work within the U.S. disclosure regime. However, our process is intended to surface issues that are globally applicable and to establish performance metrics that will be globally comparable. This is because both U.S. and non-U.S. companies access capital in the U.S. markets and are subject to SEC reporting requirements. Despite potential geographic variations, we certainly attract significant interest from the international investment community, because the standards are industry-specific, not region-specific.

What will we see next from SASB, and what do you see as key milestones?

SASB will finish defining its standards this year [2018], and companies will then begin to integrate the framework into their filings. As a result, there will be more specific acknowledgement of the materiality of these issues by industry, and more effective disclosure surrounding them, particularly as more companies integrate sustainability into their enterprise risk management processes and more controls are put in place. Key milestones will be defined by improvements in the quality of ESG disclosure over time. The baseline has already been established. Our analysis of 2016 filings revealed that most companies already address most SASB disclosure topics in

About Sustainable Heroes

Join us on a journey into the hearts and minds of some of today’s greatest heroes, who have dedicated themselves to positively impact tomorrow’s world. We invite you to explore with us what makes these heroes tick, what drives them to overcome arduous trials and immense challenges, known and unknown. In this issue, we pay homage to a corporate leader, an Arctic explorer, a highly admired policy builder, an innovative investor and an entrepreneurial foundation president - all of whom share the goal of creating a sustainable world that is more resilient as well as financially stable. We encourage you on your own quest for ways to innovate, embrace sustainability and do the right thing. Become a heroine or hero to others and help us together solve the problems threatening our very survival. To each of you heroes and heroines, there is a brighter, more sustainable future that we can build together for future generations. We welcome nominations for people you’d like to see featured in future editions. Please send your nominations and other comments to

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