Impact Blog
What the SASB standards mean

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By John Streur, President and CEO, Calvert Research and Management

      Washington - At Calvert Research and Management, we believe the competitive functioning of securities markets requires that companies provide transparency through disclosure of material environmental, social, and governance (ESG) performance factors. That is why we are delighted by today's announcement of the official publication of standards from the Sustainability Accounting Standards Board (SASB). These standards fill a void that had presented obstacles to investors in the evaluation of ESG considerations and companies in their ESG disclosure practices.

      A great move forward

      SASB took on the crucial task of establishing a framework, in close collaboration with investors and companies, to determine the financially material sustainability issues relevant to an industry and the companies within that industry. The SASB standards will give companies a guide to focus their disclosure efforts appropriately, thereby providing investors with the ESG information most relevant to longer-term financial performance.

      Calvert is honored to have been involved with SASB since its earliest days. We are founding members of both the SASB Investor Advisory Group and the SASB Alliance, and through these channels have been able to voice our views as the SASB standards evolved over the past several years.

      Our collaboration extends across our organization. Our analysts - some of whom participated in SASB's standard-setting industry consultations and working groups and hold SASB's Fundamentals of Sustainability Accounting (FSA) credential - incorporate SASB's concepts of materiality into the research we do on sectors and companies.

      What the SASB standards mean for US companies

      U.S. securities markets are the most liquid and trusted in the world. At the heart of our market's functioning is transparency into the financial characteristics and condition of the issuers of the securities that trade on our exchanges. The U.S. Securities and Exchange Commission (SEC) plays a critical role in creating and enforcing the rules and standards used to ensure investors have the information they need to accurately assess these securities.

      Historically, the SEC has done a fine job in the difficult task of balancing the needs of investors with those of the issuers of securities. However, the framework in which the SEC operates was not built to change as rapidly as today's information systems are moving, and was not built to handle the ESG data that investors want and need in 2018.

      SASB's standards fill this gap, and their use will begin to provide the marketplace with the information investors need to assess a company's performance on key ESG issues. The standards will also help steer investors' corporate engagement conversations toward those ESG matters most impactful to a company's bottom line.

      Using the SASB standards

      The codification of the SASB standards allows responsible investors like Calvert to evaluate and compare how effectively companies manage their material ESG risks and opportunities. Calvert incorporates SASB tools into our proprietary research and investment processes to create investment products that reflect ESG materiality. We evaluate the risk characteristics and exposures of our index strategies not only through traditional financial measures, but through the lens of SASB's industry classification scheme, the SICS, as well. Our corporate engagement work includes active dialogue with companies on disclosure of material ESG issues, and we look forward to working with other SASB Alliance members to engage with companies to disclose more information in accordance with the standards.

      All this has contributed to bringing more uniformity and transparency to the market as market participants look beyond traditional financial metrics to assess the risks and opportunities facing a company.

      Bottom line: Calvert believes issuers of securities should adopt the SASB disclosure standards and begin to provide comparable ESG data to investors. Investors need this information, and the U.S. securities markets need this framework to remain the world's most liquid and transparent, and, therefore, most trusted, securities market.