Getting Serious About SASB – Companies, Investors Are Tuning In. What About Accounting Firms?

The importance of the work over the past several years of the Sustainable Accounting Standards Board in developing industry-specific ESG disclosure recommendations was underscored with the recent letters to company leadership from two of the world’s leading asset management firms.

Corporate boards and executive teams got two letters in January that included strong advice about their (portfolio companies’) SASB disclosures.  BlackRock CEO Larry Fink explained to corporate CEOs his annual letter:  “We are on the edge of a fundamental reshaping of finance. Important progress in improving disclosure has been made – many companies already do an exemplary job of integrating and reporting on sustainability but we need to achieve more widespread and standardized adoption.” 

While no framework is perfect, BlackRock believes that the SASB provides a clear set of standards for reporting sustainability information across a wide range of issues, from labor practices to data privacy to business ethics. 

In 2020, BlackRock is asking companies that the firm invests in on behalf of clients to publish a disclosure in line with industry-specific SASB guidelines by year end (and disclose a similar set of data in line with the TCFD’s recommendations). 

Separately, State Street Global Advisors (SSgA) CEO Cyrus Taraporevala in his 2020 letter to corporate board members explained:  “We believe that addressing material ESG issues is a good business practice and essential to a company’s long-term financial performance – a matter of value, not values.”  The asset management firm [one of the world’s largest] uses its “R-Factor” (R=“responsibility”) to score the performance of a company’s business operations and governance as it relates to financially material and sector-specific ESG issues.

Continuing:  The ESG data is drawn from four leading service providers and leverages the SASB materiality framework to generate unique scores for 6,000+ companies’ performance against regional and global industry peers. “We believe that a company’s ESG score will soon effectively be as important as it credit rating.”

About SASB’s progress:  Recommendations for corporate disclosure centered on materiality of issues & topics were fully developed (“codified”) in November 2018 for 77 industry categories in 11 sectors and are now increasingly being used by public companies and investors as important frameworks for enhanced corporate disclosure related to ESG risks and opportunities. 

SASB provides a Materiality Map for each sector (using SASB’s SICS® - The Sustainability Industry Classification System) and provides a Standards Navigator for users; there is also an Engagement Guide for investors to consider when engaging with corporates; and, an Implementation Guide for companies (explaining issues and SASB approaches).

The fundamental tenets of SASB’s approach is set out in the Conceptual Framework: Disclosures should be Evidence-based; Industry-specific; Market-informed.  The recommended metrics for corporate disclosure include fair representation, being useful and applicable (for investors), comparable, complete, verifiable, aligned, neutral, distributive.

Separately, accounting and auditing professionals working with their corporate clients are being urged to “tune in” to SASB. Former board member of the Financial Accounting Standards Board (“FASB”) Marc Siegel shared his thoughts with the New York State Society of CPAs in presenting: “SASB: Overview, Trends in Adoption, Case Studies & SDG Integration”.  The Compliance Week coverage is our Top Story this week.

Marc Siegel is a Partner in E&Y’s Financial Accounting Advisory Service practice, served a decade on the FASB board and was appointed to the SASB board in January 2019. He was in the past a leader at RiskMetrics Group and CFRA, both acquired by MSCI, and is recognized as a thought leader in financial services – his views on SASB will be closely followed.

With the growing recognition of the importance of SASB recommendation for disclosure to companies and the importance of SASB’s work for investors, he encouraged N.Y. State accountants to get involved and assist in implementing controls over ESG data, suggesting that SASB standards are a cost-effective way for companies to begin responding to investor queries because they are industry-specific. 

Accountants can help by putting systems in place to collect and control the data and CPA firms can use SASB standards as criteria to help companies that are seeking assurance for their expanding sustainability reporting. This is an important call to action for accounting professionals, helping to generate broader awareness of the SASB standards for those working with publicly-traded companies and for internal financial executives.

The G&A Institute team has been working with corporate clients for several years in developing greater understanding of the SASB concepts and approaches for industry-specific sustainability disclosure and helping clients to incorporate SASB standards in their corporate reports. 

We’ve also been tracking the inclusion of the term “SASB” in our GRI Data Partner work examining and assessing every sustainability report published in the USA and have tracked trends related to how companies are integrating SASB disclosures into their reporting. 

Over the past three years we’ve developed comprehensive models and methodologies to assist our corporate client teams incorporating SASB disclosures in their public-facing documents (such as sustainability reports, Proxy Statements, investor presentations). Our co-founder and EVP Louis Coppola was among the first in the world (“early birds”) to be certified and obtain the SASB CSA Level I credential in 2015.

If you’d like to discuss SASB reporting for your company and how we can help please contact us at info@ga-institute.com

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.