SASB Provides a Remedy for Sustainability Issues Reporting
by Terri Eyden on
Putting the Process in Place
Formed in July 2011 to advance the work started by the Harvard University Initiative for Responsible Investment on developing methods for looking at materiality in industries, the SASB focuses on sustainability issues at the industry level so they can be measured, managed, and disclosed.
"The SASB was started as a way to move the work of the Initiative for Responsible Investment forward, based on interest in having a good set of metrics for every industry," said Rogers, who collaborated with Harvard University on its initiative for several years prior to forming the SASB. "The kind of information that investors need is changing due to the world itself changing. Mega-trends like climate change, resource constraints, and population growth really do affect the ability of corporations to create financial value.
"We're setting standards and providing information to investors so they can benchmark, act with confidence, and discern which companies they're going to outperform in a world with more regulations, different cost structures, finite resources, and new opportunities presented by these global standards," she continued.
The process for developing a set of standards for the health care sector started in October 2012. Why health care? The industry includes public companies that hold more than $800 billion in market capitalization and investment firms with more than $952 billion in assets under management.
The health care industry also represents 18 percent of US gross domestic product, is the second-largest user of energy of any sector, and generates 8 percent of US greenhouse gas emissions, according to the SASB.
"It was important for us to lead with a sector that has a broad, full range of nonfinancial ESG issues," Rogers said. "What may be surprising to some people is that the health care industry is very significant in terms of its environmental impacts. Most people may think of it as having significant social impacts."
The SASB standards development process includes:
- Research supported by Bloomberg technology, data, and analytical tools;
- Balanced, multi-stakeholder industry working groups;
- A ninety-day public comment period; and
- Review by an independent standards council comprised of experts in standards development, securities law, environmental law, metrics, and accounting.
More than 130 individuals participated in the health care working group, representing health care organizations and public companies, such as Cleveland Clinic, Kaiser Permanente, Baxter, Johnson & Johnson, Merck, and Pfizer Inc. Investors and analysts from such firms as AllianceBernstein LP, Breckinridge Capital Advisors Inc., Calvert Investment Inc., and UBS Securities also helped develop the health care standards. The group also included representatives from accounting and professional services firms Crowe Horwath, Deloitte, EY, and PwC.