How SASB Can Help You Reach Your Investors
Practical Steps to Make the Most of the New Framework
By Heather Keough, Chris Plath, Miguel Santisteve, Elodie Juan and Andrew Bond at Leaders Arena
Sustainability matters to investors! A growing number of them are closely tracking companies’ Environmental, Social and Governance (ESG) performance. Our latest research suggests that $5.58tn of equity assets globally fully integrate ESG considerations, a 10.2% year-on-year increase. More information can be found in Leaders Arena’s ESG Market Monitor.
Despite entering an overcrowded space where numerous reporting frameworks (GRI, TCFD, IR and the UN SDGs)[1] co-exist to guide companies’ sustainability reporting, the Sustainability Accounting Standards Board (SASB) framework has quickly gained traction as a useful tool to help companies cut through the high reporting volumes and more effectively communicate with their investors. Investors have limited time to fully review companies’ sustainability disclosures, which for larger companies are typically contained in reports that can reach hundreds of pages in length. The SASB standards were designed to develop data that is more comparable, concise and relevant for both companies and investors.[2]
What makes the SASB Standards unique?
SASB's focus on a limited number of financially relevant, industry-specific standards helps companies and investors pinpoint what’s most important, thereby cutting through the sustainability reporting “noise”. SASB’s standards are:
Industry-specific: Unlike other reporting frameworks, SASB has defined a set of sustainability accounting standards with specific data points for each of the 77 sub-industries[3] covering all economic activities within its 11 industries.
Focused on financial materiality: Through metrics that are focused on financial materiality, SASB is a useful tool for investors who do not wish to comb through large amounts of ESG disclosures. SASB standards thus represent the most investor-focused framework for companies to report against.
Flexible: While SASB has defined what it thinks are the most financially material factors for each industry, it leaves companies to decide for themselves which factors are the most relevant to disclose.
Concise: Companies find it useful having on average just 6 SASB disclosure topics to focus on per industry, as opposed to the dozens of data points required by other reporting frameworks. It’s interesting to note however, that the economic activities with the highest perceived ESG associated risks require the greatest number of SASB disclosure topics: Extractives & Minerals and Resources & Industrials have both 8, followed by Food & Beverages and Health Care with 7, while Services has 3.
Comparable: The framework contains both quantitative and qualitative aspects although it emphasises the former: 75% of the SASB disclosures are quantitative metrics. This is key to gain access to concise and quantified disclosures, which makes SASB disclosures investor friendly.
Greater Investor Uptake on a Global Scale
While originally developed for use in the US, SASB’s influence is growing on a global scale. The recent expansion of its advisory group to include new investors, many of which are based outside the US, helps illustrate this. These include Norges Bank Investment Management, UBS Asset Management, Legal and General Investment Management and Schroders Investment Management.[4]
Based on our research, SASB has developed a significant influence in the market. Investors that are members of the SASB Advisory Group and Alliance[5] hold over 37% ($14.99tn) of the $40.61tn in total global equity assets under management*. Key global investors such as BlackRock, State Street, Nordea, APG and PGGM are big advocates of the SASB standards. These asset managers are contributing to further refining the standards and encouraging more companies to report against them.
More recently, SASB’s standards have gained traction in Europe, and our analysis suggests that, following the recent adoption of SASB by leading European investors such as Norges Bank IM, European equity assets following SASB ($2.53tn) already represent 33% of all equity assets managed from Europe ($7.64tn)*.
Yet, clearly SASB has to date gained more traction in the US than in Europe. US equity assets backing the standards ($11.86tn) represent 44% of total US equity assets under management ($27.20tn)*.
Three Practical Steps to Starting Your SASB Reporting Journey
Leaders Arena’s research indicates that investor backing of SASB is already considerable, and we expect that the demand for disclosure aligned with SASB will continue to grow. We therefore advise companies in the US and Europe to adopt SASB following these practical steps:
Step 1: Become more familiar with the relevant SASB metrics for the company’s industry. (Note that there may be more than one relevant industry for your company.)
Step 2: Apply the standards for directional use in any ESG materiality assessments.
Step 3: Consider various approaches as you begin reporting with SASB standards:
Referencing SASB in ESG-related reports, a practice adopted by companies such as Nike & General Motors in the US, Schneider Electric in France and Diageo in the UK.
For US-listed companies, including SASB materiality topics in their SEC filings: Boston Properties and Etsy are good examples.
Producing a standalone SASB Report, as done by Ford and Travelers.
Going forward, we also advise companies to consider referencing SASB in their ESG Investor Presentations.
SASB is a powerful tool with which to evaluate your own sustainability factors and to improve the quality of your reporting to investors. At Leaders Arena we help companies to seize this opportunity. You can get in touch with us for a free initial consultation at: support@leadersarena.global.
If you want to learn more, register to watch our webinar dedicated to SASB:
How SASB Can Help You Reach Your Investors
For European attendees: Wed, Sep 11, 2019, 12:00 PM - 12:30 PM BST Register here
For North American attendees: Wed, Sep 11, 2019, 2:00 PM - 2:30 PM EST Register here
Notes:
[1] GRI: The Global Reporting Initiative; TCFD: The Task Force on Climate-related Financial Disclosures; IR: Integrated Reporting; UN SDGs: The United Nations Sustainable Development Goals
[2] The Sustainability Accounting Standards Board (SASB) is an independent organisation that identifies and maintains standards to help companies disclose on sustainability topics that are material to businesses from an investor point of view.
[3] SASB standards use the Sustainable Industry Classification System® (SICS®) to group companies based on shared sustainability risks and opportunities.
[5] The SASB Advisory Group consists of leading asset owners and managers whose goal is to improve the comparability and quality of sustainability related disclosures to investors. The SASB Alliance consists of organisations which report against SASB and are committed to developing more standardised, industry-specific and materiality-based standards.
