New SASB standards could fit private sector

Two Michael Bloomberg-associated groups are advocating for climate aware financial reporting.

US-non profit The Sustainability Accounting Standards Board published its new provisional guidelines for climate aware financial reporting in the infrastructure sector last week – and while they are designed for the public sector, SASB infrastructure analyst Bryan Esterly noted in a call that LPs have shown significant interest in applying these (or similar) standards to the private sector. 

“SASB standards are designed for public companies to use in their 10-Ks to communicate material sustainability information to their investors,” Esterly told Infrastructure Investor. “With that said […] there's a lot of interest in sustainability and [environmental and social governance] from asset owners. An increasingly large number of them are coming out with some kind of guidance or mandate that their GPs have to have a clear ESG or sustainability strategy, and I think that SASB is a fantastic solution for GPs looking for a more cohesive sustainability strategy. I think there's a lot of applicability in this space as well.”

The SASB board of directors is chaired by Michael Bloomberg, who is also the founder of a separate task force which released its inaugural report calling for climate risk-related reporting in concert with the release of the final set of SASB provisional standards last week. The Task Force for Climate-Related Financial Disclosures was formed within the Financial Stability Board at the request of the G20 last December. 

In an email this morning, SASB chief executive and founder Jean Rogers said: “For the first time, we can begin to see patterns of material ESG risk and exposure across the equities portfolio. For the first time, we have standards that can characterise the nature of that risk and enable investors to understand and price it.” 

To build its standards, SASB split the entire US public sector into 10 distinct sectors which are divided into 79 individual industries. The infrastructure sector was the tenth and final sector for which standards will be released, marking the end of a process that began in October 2012. In the interim, 437 companies showed interest in the new standards and responded to working group outreaches. 

Specific industries within the infrastructure sector that are included within the standards are water, gas and electric utilities as well as engineering and construction. Criteria for selecting reporting items was determined by a rigorous process of discovering the most meaningful and material reporting items within each sector.

Electric utilities would be most heavily affected by the voluntary standards, with 10 topics such as greenhouse gas emissions, air quality and water management split into 21 different accounting metrics. Some of the accounting metrics are quantitative – such as gross global scope 1 emissions, percentage covered under emissions-limiting regulations, and percentage covered under emissions-related regulations – and some are meant to be reported through discussion and analysis – e.g., description of long-term and short-term strategy or plan to manage Scope 1 emissions, emission-reduction targets and an analysis of performance against those targets.

Beginning tomorrow, SASB will open up a 90-day period of deep consultation to “get feedback on the decision usefulness and cost-effectiveness” of the new standards across all sectors. For the next year, the new standards will remain “provisional”, Esterly said, and during that time, SASB will continue to tweak where needed.

“We are spending this next year focusing on industry-by-industry, making sure that companies understand the standards, that they've had an opportunity to provide input, and then likewise that investors understand the standards and have had an opportunity to provide input.”

Downloads of the full SASB accounting standards are available here