Alan L. Beller, a director of the Sustainability Accounting Standards Board (SASB), writes about the efforts to quantify sustainability in financial reports.
[I]n the 21st century, financial information doesn’t provide a complete picture of corporate performance….73 percent of institutional investors indicated that they take sustainability (environmental, social, and governance) issues into account in their investment analysis and decisions, to help manage investment risks.
Disclosure of performance on sustainability topics that would be decision-useful to investors and cost-effective and sensible for companies and that would be equal to the quality that markets expect for financial information—can best be accomplished via a clear focus on material information and on an industry-specific market standard. Just as the markets have a standard for material financial information—US GAAP—the markets need a standard for material sustainability information.
This is the need SASB was created to address. SASB standards are designed to help companies effectively disclose material sustainability information and comply with regulatory obligations, working within the framework of existing U.S. securities laws. SASB’s provisional standards have been developed, and SASB is embarking on a project to make the provisional standards final, in both cases through processes that are designed to produce standards that are cost-effective and decision-useful, and to embody in those standards industry-specific sets of disclosure topics and metrics that are reasonably likely to constitute material information for companies in that industry.
Source: Nasdaq Governance Clearinghouse