Stockholm (NordSIP) – While many investors still find that data quality is one of the most significant hurdles remaining when integrating ESG in their investment process, the Sustainability Accounting Standards Board (SASB) emerges as one of the leading organisations investors and companies can rely on for guidance on financially material sustainability reporting. At a recent event in Stockholm, NordSIP met with Jeff Cohen, Institutional Product Strategist at SASB (pictured above at the Stockholm event) and talked about the organisation’s increasing influence outside of its home market.
A growing reach
Founded in 2011 in the United States, SASB’s popularity is growing across the planet. However, the perception that the standards are mainly relevant for US firms or investors has been a challenge, according to Cohen. “There are strong signals that the market is starting to move past that idea,” he says. “We’re doing everything we can to change this perception. For example, we’ve significantly broadened our outreach to raise awareness and understanding among companies, investors, and other stakeholders in key global markets, including Europe.”
“We’re also fortunate to have dedicated professionals from 20 different countries lending their industry expertise to our Standards Advisory Group (SAG), which provides direct market input into the standards development process on emerging issues and matters of technical implementation, including regional considerations,” Cohen continues. “From the Nordics, for instance, the SAG includes professionals from Novo Nordisk, UPM-Kymmene, and Stora Enso. Given the international makeup of the group, SASB’s regular engagement with the SAG helps maintain and even enhance the global relevance of the SASB standards.”
A global relevance
“Although SASB’s early emphasis was on US capital markets, the sustainability issues covered by our standards are industry-specific—not region-specific—so they’re globally relevant,” says Cohen. “As a result, in recent years, we’ve seen a great deal of interest in SASB standards around the world among investors, reporting companies, and others.”
“Uptake by reporting companies has also begun to expand across international borders,” Cohen continues. “Today, companies in at least 16 countries across four continents are using SASB standards in their core communications with investors. In fact, more than 4 out of every 10 SASB reporters are domiciled outside the US, and use of the standards is particularly strong in the European and Asia-Pacific regions. Investor demand for consistent, comparable, reliable sustainability information is the single most important motivating factor among companies that look to the SASB standards to help solve their sustainability-related performance and reporting challenges.”
Expanding the Investor Advisory Group
The SASB foundation operates in a governance structure which includes a board of directors and a standard-setting board, which develops, issues, and maintains the SASB standards. The two boards are supported by advisory bodies, including the Investor Advisory Group (IAG), composed of leading investors who support improved ESG disclosure.
“The IAG has expanded to comprise leading asset owners and managers from North America, Europe, and Asia, with more than a third of the 44 members coming from outside the US,” adds Cohen, to illustrate the global expansion of SASB. “These include some of the world’s largest investors, representing more than US$33 trillion in assets under management. In the Nordics, specifically, we’re thrilled to have Norges Bank Investment Management and Nordea Asset Management actively participating in the IAG, and to have Danske Bank and Tracefi licensing SASB’s intellectual property to power their ESG processes.”
While the IAG’s expansion is a sign of the organisation’s growing significance for investors, the SASB admits new members conservatively. “SASB is fortunate that the market has demonstrated an extraordinary level of interest in joining our IAG,” Cohen explains. “Most obviously, the group demonstrates visible investor support for a market standard for sustainability disclosure. They also provide invaluable input into our standard-setting process to ensure company reporting supports their needs as effectively as possible. To those ends, we look for commitments from prominent and respected organisations that are willing and able to engage with us on a regular basis and provide thoughtful feedback on how SASB can be additive to their work”.
“Although anyone in the global institutional investment community can express interest, members are added by invitation, named representatives must be in senior investment decision-making roles, and the representatives serve two-year terms on behalf of their organisation with an option to renew. We anticipate the IAG will continue to grow alongside market interest in sustainability in general and SASB in particular,” Cohen adds.
Meeting different priorities
“The differences in how investors use sustainability data is typically dictated more by their client base, risk appetite, time horizon, asset classes, and the geographic focus of their investments rather than the country in which they are headquartered,” Cohen explains. “For example, Nordea has shared a case study on how it used SASB’s materiality framework to enhance its fundamental analysis of a mining company in an emerging market. This approach is similar to that taken by many asset managers when investing in emerging markets, where sustainability data is often sparsely reported, but structural growth dynamics can present attractive return opportunities for companies that have effective management in place around environmental, social, and governance risks.”
Picture © NordSIP