SASB launches guide to investor engagement on sustainability

The Sustainability Accounting Standards Board (SASB) has unveiled an industry-by-industry guide for asset owners and managers to improve their engagement with investee companies, giving investors specific advice on what material topics could be addressed.

The group’s so-called Engagement Guide provides specific advice for shaping investor engagement across 79 industries, broadly grouped into sectors and covering everything from pharmaceuticals to oil & gas to tobacco producers. In each instance SASB has identified what it considers to be the sustainability issues most likely to impact the financial performance of companies in the sector, as well as offering sample questions investors might want to ask at AGMs.

Beyond broad questions concerning environmental, social capital, human capital, governance and business model issues associated with each industry, the guide also offers up broader contextual considerations, which often address the scale and breadth of a company’s operations.

In many instances – particularly with those companies involved with the production or consumption of fossil fuels – the document suggests grilling management about the impact of climate change regulation, how greenhouse gas emissions are managed and whether their long-term business plans account for a shift in the demand for conventional fuels.

Managing and disclosing water consumption levels is a suggested engagement topic across a wide range of industries, as is asking investee companies about the steps they are taking “to reduce or limit exposure to corruption”.

Asset manager BlackRock’s Global Head of Investment Stewardship, Michelle Edkins, introduced the guide by recognising that – although disclosure and voting atAGMs were both powerful tools in an investor’s arsenal – direct engagement is often the most effective route for shareholders.

“Sometimes the aim of engagement is to encourage companies to change and to adopt business practices that seem more aligned with long-term shareholder interests and corporate resilience,” she continued. “It is also about investors explaining how information that goes beyond pure financials is used in their investment analysis and stewardship work.”

The primary aim of the guide, it states, is to assist asset owners and managers in using SASB standards to shape their corporate engagement. The standards, which have been developed with input from 2,800 individuals linked to $23.4tn of managed assets, are one of the more widely-adopted sets of rules for disclosing material sustainability information in filings to the Securities and Exchange Commission.

Janine Guillot, Director of Capital Markets Policy & Outreach at SASB, reiterated that sustainability issues vary in impact by industry and sector, and the guide’s role was to identify which were relevant to each investor, allowing them to “evaluate and compare performance in the context of industry characteristics and value drivers”.

SASB’s own guidelines come hot on the heels of EY and Hermes Equity Ownership Services’ co-publication of a framework to help guide investor engagement with German supervisory boards. As reported in Responsible Investor, these guidelines identify what sort of discussions can be had with supervisory boards ahead of the EU Shareholders’ Rights Directive, which will require shareholders to take a more active role in monitoring and engagement activities.