Rogers: Yes, but these reports are designed for a broad group of stakeholders, not investors. Their 10-K documentation—which is designed to serve investors—has not caught up and still uses boilerplate language. One could argue that companies are not compliant if they know more than they are saying. We’ll see how the SEC interprets this going forward.

Ellis: Since company filings are annual, will SASB’s state of disclosure data be updated annually going forward?

Rogers: That’s exactly right. We review the filings every year and map the state of disclosure, which rates highest when it actually contains performance data. It’s still hard for investors to compare the different standards that exist today, but data provides a basis for comparison. We’re in favor of a corporate narrative that uses performance data to distinguish companies, one from another.

Ellis: Let’s talk about how investors, advisors and asset managers can use what SASB is producing. Tell our readers about SICS, the Sustainable Investing Classification System that SASB has developed.

Rogers: When we first started standard setting in 2011 one of the questions we asked was what classification system will we use? We researched all of them, from the commercial to the government system platforms. We did not have the budget to license any of the commercial systems, and the free government classification systems were sorely out of date.

Steve Lydenberg was a founding SASB board member and the “L” in the KLD Index, one of sustainable investing’s first indexes which is now owned by MSCI. He suggested we create our own classification system, so we could group industries with like sustainability characteristics. This enabled us to research 79 industries faster because they could be grouped around shared sustainability risks and opportunities.

In some cases, SASB has a fundamentally different approach to grouping industries from other classification systems. For example, oil, gas and coal are grouped with mining since they are all non-renewable resources. They have similar characteristics related to thinking about the environment and the effects of transitioning to lower carbon economies. They also have high-intensity carbon footprints.

Ellis: What else makes the SICS classification system different from others?

Rogers: What’s great about the SICS system is that you can see where certain kinds of ESG risks are concentrated and where they are diffused. You get a unique view because industries are grouped this way, which isn’t available using other systems. It’s a different lens on the ESG risks companies face.

SICS will have its day in the sun when we can see the overlay of the holdings and have performance data from the companies. We’re designing the infrastructure now to provide that point of view for investors.