SUSTAINABILITY ACCOUNTING STANDARDS BOARD · sasb briefing book| 1 table of contents the role of capital markets in our changing world_ a world-class standards-setting organization_

SUSTAINABILITY ACCOUNTING

STANDARDS BOARD

April 2014

ACCOUNTANTS WILL SAVE THE WORLD

If we are to bring business solutions to the scale that the world needs, we must get all business involved, or said differently, we must change the (accounting) rules of the game.

- Peter Bakker, WBCSD

SASB BRIEFING BOOK| 1

TABLE OF CONTENTS

THE ROLE OF CAPITAL MARKETS IN OUR CHANGING WORLD_

A WORLD-CLASS STANDARDS-SETTING ORGANIZATION_

OUR APPROACH_

MATERIALITY MATTERS

RELENTLESS FOCUS AND EXPERT EXECUTION

ENABLING INVESTORS TO DRIVE CAPITAL TO

SUSTAINABLE OUTCOMES

ILLUMINATING CHOICE AROUND CLIMATE CHANGE

ACTION TODAY FOR A SUSTAINABLE WORLD TOMORROW

A POWERFUL LEVER FOR CHANGE

UNSTOPPABLE MOMENTUM_

OUR PLAN FOR SUSTAINABILITY_

OUR LEADERSHIP TEAM_

SASB BRIEFING BOOK | 2

THE ROLE OF CAPITAL MARKETS IN OUR CHANGING WORLD



IN THE 40 YEARS SINCE FASB WAS FOUNDED, OUR WORLD HAS CHANGED SIGNIFICANTLY.

Res

ou

rce

Co

ns

train

ts • Impede the ability to create and sustain economic value G

ove

rnm

en

ts • Are less able to regulate complex interactions between corporations and society

Va

lua

tio

ns • Have

changed to reflect a high degree of intangible factors

Inve

sto

rs • Care about profit and how that profit is made


Mega-trends like climate change, resource constraints and population growth affect the ability

of corporations to create financial value. Economic growth cannot be sustained if the

underlying forms of environmental and social capital upon which it depends are depleted.

The capital markets have failed to evolve to reflect this new reality. Investors need information

they can benchmark to act with confidence and to discern which companies will outperform in

a world with more regulations, different cost structures, finite resources and new

opportunities presented by global sustainability challenges.

Intangible assets now compose 80% of S&P Market Value, up from 15% in 1975.

6 | SASB BRIEFING BOOK

A WORLD-CLASS STANDARDS-SETTING ORGANIZATION

Since our public launch in October 2012, we’ve engaged more than 1,500

representatives of corporations, investment firms, and other stakeholders in our standards-

setting process, representing a market cap of $6.5 TRILLION and assets

under management of $15 TRILLION. With a staff of 29, an annual budget of

$8 MILLION, an advisory council of 150 and more than 2,500 media

mentions since our launch, our momentum is formidable.


The Sustainability Accounting Standards Board (SASB) provides sustainability accounting

standards — for use by publicly-listed corporations in the US — to disclose material

sustainability issues for the benefit of investors and the public. SASB is a 501(c)3 nonprofit

organization that is accredited to set standards by the American National Standards Institute

(ANSI).

With SASB industry specific standards in place:

Companies compete — and improve performance — on the sustainability issues that

matter most.

Investors drive capital to the most sustainable outcomes.

SASB’s standards will result in the improved performance of 13,000+ corporations,

representing over $16 trillion in funds, on the highest-priority environmental, social and

governance issues.

Sustainability Accounting Standards Board


OUR APPROACH

MATERIALITY MATTERS

Our industry approach allows us to focus on issues that are highly material within an industry.

We provide standards that enable complete data sets and the ability to benchmark

performance within an industry — a previously impossible feat for sustainability data.

SASB completes the picture on corporate performance.

US GAAP

Integrated Filings SASB Materiality Map and

Accounting Metrics


US securities laws require companies to disclose material information to investors. SASB

adheres to the US Supreme Court’s interpretation of materiality (information that is of interest

to a reasonable investor) and works within the current regulatory framework. The work of

SASB in sustainability accounting will complement the work of the Financial Accounting

Standards Board (FASB) in financial accounting. SASB standards, which are designed for

inclusion in the MD&A section of the Form 10-K and 20-F, help companies comply with

existing regulation to report on material information.

SASB provides quarterly briefings to the SEC regarding material issues in each sector, the

underlying evidence and the outcomes of the Industry Working Groups.


RELENTLESS FOCUS, EXPERT EXECUTION

We focus solely on the US markets, where a mandatory reporting environment already exists.

This approach enables complete data sets, benchmarking and enforcement by the SEC.

Disclosure is a proven, powerful mechanism for change.

SASB’s Focus

10 Sectors in 10 Quarters

US Capital Market

Public Companies

Industry-Specific

Material Issues

Time Frame Sector

# of Industries

Q4, 2012 Health Care Services 6

Q1, 2013 Financials 7

Q2, 2013 Technology & Communication 6

Q3, 2013 Non-Renewable Resources 8

Q4, 2013 Transportation 8

Q1, 2014 Services 10

Q2, 2014 Resource Transformation 5

Q3 + Q4, 2014 Consumption 15

Q1, 2015 Renewable Resources & Alt. Energy 8

Q2, 2015 Infrastructure 10

2012

2014 2015


The scale and pace of solutions are dictated by the scale and pace of problems. Given the

vulnerability of our planet and the inefficiency of our markets, we no longer have the luxury

of time.

SASB is using a rapid and rigorous prototype method to deliver a full set of standards to the

market for 88 industries in just two and a half years.

Our process is based on evidence, driven by research, underpinned by technology and

crowd-sourced by experts. Multiple checkpoints throughout the standards setting process

allow for an iterative approach with ultimate review by our external Standards Council.


ENABLING INVESTORS TO DRIVE CAPITAL TO SUSTAINABLE OUTCOMES

SASB enables investors to see

new opportunities for sector allocation and to

compare the performance of companies.


Sector Allocation: SICS surfaces industries with

great potential for addressing global sustainability

challenges, such as infrastructure and renewables.

Sustainable Industry Classification System (SICS)

SASB Accounting Metrics Materiality Map

Portfolio Risk: Our materiality map allows investors to evaluate exposure to material sustainability risks and opportunities given their industry concentration.

Benchmarking Performance: Our accounting metrics allow investors to compare sustainability performance between issuers in the same industry.


ILLUMINATING CLIMATE CHANGE DISCLOSURE


Exactly how much have market participants contributed to today’s greenhouse gas load, and when? If global limitations on GHG emissions are inevitable, who is well-positioned to absorb the cost and who will be driven out of business? What will the scorecard look like, sector by sector and company by company, so that the market can determine who are the good and bad actors? These are key questions that cannot be answered without industry-specific, standardized disclosures.

- Jeffrey Smith, Matthew Morreale and Michael Mariani

Capital Markets Law Journal, 2008


ACCOUNTING METRICS FOR CLIMATE CHANGE IN SIX

INDUSTRIES

Making climate change relevant to investors involves breaking down the impacts by industry.

This is because what investors need to understand about how companies impact (or are

impacted by) climate change varies at the industry level.

In real estate, an investor might want to understand the geographic location

of vulnerable assets, or the average energy efficiency (kw-hr/sf) of the

buildings in a REIT.

In airlines, the age of the fleet and the fuel efficiency (gallons per passenger

mile) matter, as well as the fuel hedging practices of the airlines, which can

mask a need for conservation or fuel switching.

In automobiles, the fuel efficiency of the fleet in mpg (CAFÉ standards) and

the alternative fuel vehicles under development are key metrics.

For an electric utility, the % renewables in the portfolio and the GHG

emissions from power production are useful for determining potential carbon

liability and positioning, as are the policies supporting distributed generation

(net metering) and the ability to accept intermittent loads of renewables into

the grid.

For oil and gas companies, the volume of carbon based reserves currently

booked as an asset is a critical metric that will affect long term valuation.

In banking and insurance, the vulnerability of the insured assets to weather

related events and/or the carbon intensity of those assets matters to

investors.


ACTION TODAY FOR A SUSTAINABLE WORLD TOMORROW

SEC Guidance on Climate Change

In February 2010 the SEC issued guidance on the materiality of climate change, paving the

way for disclosure of material information to investors. However, the guidance did not go far

enough in terms of standardizing disclosure or providing metrics, and it has resulted in a

proliferation of boilerplate information.

Climate Change-Related Disclosure in 2011 10-K Forms


Government regulation and civil society action cannot be the only solutions to combating

climate change. Our capital markets were founded on disclosure—it’s a powerful mechanism

for change. Efficient allocation of capital demands access to a true and fair representation of

value. Setting standards to account for ESG factors in publicly-traded companies will improve

the understanding of the potential for long-term value creation or destruction by market actors

and allow it to be priced in.

It’s not about more reporting, it’s about better reporting. Reporting that empowers companies

and investors with decision-useful information that will transform the capital markets.

Using CDP’s Scope 1, 2 and 3 definitions, Bloomberg data, and

SASB’s SICS, SASB has taken a first look at how GHG

emissions break out across SASB’s SICS sectors.


A POWERFUL LEVER FOR CHANGE

The Next Generation of Investors

The investors of 2013 are not the same as they were in 1973, nor will they be the same as

2053.

SASB is laying the groundwork for a new generation of investors to act on its values with

conviction, based on useful information that allows them to discern green chips from blue

chips.

Socially and environmentally responsible assets rose more than 324% from 1995 to 2007,

signaling a growing interest in sustainability among investors. Investors are shifting from a “do

no harm” approach to a “do more good” approach. This shift will benefit companies committed

to the health of the communities in which they operate.


SASB standards enable sustainability fundamentals to be accessed — by all investors —

alongside financial fundamentals. Access to material information on sustainability factors is the

right of every investor. SASB will set the standards that allow the market to evaluate

performance—via benchmarking, ratings and rankings.

Comparing Fundamentals


UNSTOPPABLE MOMENTUM

“SASB is a critical element of progress in sustainable finance. Companies need to have a reasonable road map and standards for disclosure of industry-relevant information, they need assurance the data they are analyzing is good data, and they need comparability so that they and investors can start benchmarking.”

“SASB has figured that what gets measured – and gets into the regulatory pipeline – is actually what gets managed.”

“What we want is reporting which not only gives us the financial part of the reporting but also contains material information on ESG issues. [This is why] CalPERS has joined a group called SASB.”

“SASB is timely because it is not just the wider world that has changed: the methodology for valuing companies has also changed dramatically in the last 25 years.”

“SASB is a game changer for sustainable business … It’s an ambitious, even audacious agenda. But I wouldn’t bet against it.”

“While SASB is a very new organization, it has already attracted significant interest and support from a diverse and broad range of stakeholders.”

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=JjcjqCbsO4QZ9M&tbnid=xYx98q-jG-gNNM:&ved=0CAgQjRwwAA&url=http://www.zdnet.com/blog/btl/sony-partners-with-news-corp-to-offer-wsj-ny-post-marketwatch-on-e-readers/28672&ei=vdNZUaukPKquiQLGyYFw&psig=AFQjCNGvf1maWTdj22irkAbMKvsz6rsUDg&ust=1364927806027728

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=5MZL0Jsoa2deWM&tbnid=oBi5hu1CbKaZeM:&ved=0CAUQjRw&url=http://www.cereplast.de/news/cereplast-in-the-news/&ei=s843Uf_IIcGyyAHPjICgBw&bvm=bv.43287494,d.aWc&psig=AFQjCNGucjO7rV5bnKpe7mYYv7RN2z22gw&ust=1362698284429498


Since our public launch in 2012, SASB has commanded

powerful and growing backing.

Our Advisors

Our Funders Our Advisors

Bloomberg Philanthropies

The F.B. Heron Foundation

Gordon and Betty Moore Foundation

TomKat Charitable Trust

Generation Foundation

Doris Duke Charitable Foundation

The Rockefeller Foundation

SASB Board of Directors

Eileen Fisher Community Foundation

The Jeremy Grantham Foundation for the

Protection of the Environment

Metanoia Fund

The Betsy & Jesse Fink Foundation

Deloitte

KPMG

Ernst & Young

Morgan Stanley

JPMorgan Chase & Co.

CalPERS

UBS

Harvard Business School

The Conference Board

KKR

CalSTRS


OUR PLAN FOR SUSTAINABILITY SASB is delivering standards to the market while building a world class team and developing

earned income program areas. The groundwork we’re laying today will enable SASB to be an

economically sustainable organization by 2018. Our revenue will come from the following main

sources:

Adoption Products

Delta Series: Quarterly mini-conferences that examine SASB’s latest

sustainability accounting standards in an engaging half-day conference.

Currently free to the public, SASB sells corporate sponsorships to generate

earned income from the events.

The SASB Corporate Roundtable: announced at the Clinton Global

Initiative, the Roundtable will offer C-suite executives and others who touch

the form 10-K the opportunity to learn how to integrate SASB standards

into their SEC filings. An annual fee is required for participation.

Education &

Certification

Certification Programs: Similar to LEED accreditation, SASB certification

will be awarded by SASB at the national level and will complement these

programs with educational materials needed to learn concepts, content and

methods.

Annual Conference: SASB will convene a fee-based annual conference

that will gather SASB’s professional community for continuing education

and updates on the organization.

Licensing Products

Standards Navigator: A web-based tool used to easily search through

SASB standards, as well as access to some of the research background

and evidence gathered in Standards development.

Licensing: SASB is exploring the ways to license standards and

information associated with the development of the standards via technical

libraries, Software (ERP & Business Systems), Professional Services

(Consultants), International and possibly SASB’s Materiality Map and

SICS.


A Standards Setting and Complementary Revenue Generating Organization

By 2018, SASB will become an economically sustainable organization

SASB requires $25 million over the next five years to complete 88 industry standards

and fully establish revenue generating activities

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2014 2015 2016 2017 2018

Earned Income + Grants vs. Expenses

Adoption Products Certification ProgramsAnnual Conference (CE) Standards Navigator & Technical LibrariesERP Licensing ProServ LicensingInternational Licensing Capital CampaignExpenses


TOGETHER, WE WILL MAKE ALL INVESTING IMPACT INVESTING.

SASB has a sound business model to reach economic sustainability by 2018. In order to build

capacity and realize our earned income, we need to raise $25 million in philanthropic support.

This investment will help:

Remain a world-class research and standards setting organization Complete our standards setting process for all 10 sectors in 2.5 years Transition to an earned income model by developing and establishing our education programs Ensure adoption of standards by corporations and the SEC

Our capital campaign will help us build our capacity and fuel our programs and operations. By

investing in our people, SASB will remain a world-class, standards-setting organization that is

economically sustainable over time.


OUR LEADERSHIP TEAM

Our leadership team’s strengths include a unique combination of sustainability, finance,

securities law and technology. Under this strategic expertise a world-class, next-generation

standards-setting organization is emerging and finding its place among institutions like FASB

and the SEC. With strong ties to Harvard University and headquarters in the sustainability

capital of the world — San Francisco — SASB is well-connected on both the east and west

coasts.


JEAN ROGERS, PhD PE, Founder and CEO

Dr. Jean Rogers has 20 years’ experience in sustainability and

management consulting across a wide variety of industries, working with

clients to integrate sustainability into strategy and operations in order to

reduce risk and improve performance across the triple bottom line. Jean’s

leadership experience includes 10 years as a Principal at Arup, a global

consultancy focused on sustainable development, working with leading clients in the

government, utilities, infrastructure, manufacturing, healthcare, and real estate sectors in the

US, Europe, and Asia. She has particular expertise in developing metrics for measurement of

sustainability performance, having worked with the Global Reporting Initiative on development

of the G3 corporate sustainability reporting guidelines, and partnering with the Initiative for

Responsible Investment at Harvard University to develop a method for assessing the

materiality of sustainability issues by sector, as a basis for identifying key performance

indicators and opportunities for improved competitiveness.

Prior to Arup, Jean was a management consultant at Deloitte, working in the environmental

and manufacturing practices to help leading companies improve business and product

performance through sustainability.

Dr. Rogers is a former Loeb Fellow at Harvard University who has authored multiple

publications and won several awards. Dr. Jean Rogers holds a PhD in Environmental

Engineering from the Illinois Institute of Technology, and an ME in Environmental Engineering

and a BE in Civil Engineering, both from Manhattan College. Jean is based in the Bay Area,

where she lives with her husband and daughter.


MATTHEW WELCH, COO

Matthew Welch has dedicated his career to leading mission-based organizations

through the challenges of achieving growth, scale, and self-sufficiency. His work

experience spans government, nonprofit, and for-profit sectors, and he has led

teams in entering new markets, launching products, and increasing the profitability

of operations.

At SASB Matthew is responsible for the efficiency and effectiveness of the internal

organization and for driving earned income through education and training products. Matthew has

broad experience in education, having served as COO at Junyo, a learning analytics company, and

holding the top operating role at Kaplan K12 Learning Services, where he oversaw sales and service

operations, product development, and technology. At Kaplan’s Test Prep division, Matthew led the

organization’s shift to online product offerings, and he built the platforms required to deliver them. He

has also consulted for numerous government and education organizations on financial management,

program development, and process improvement.

Matthew holds a BA from Grinnell College and a MPA in management and public policy from Columbia

University. He is member of the Grinnell College Board of Trustees, where he sits on the budget

committee and is vice-chair for the academic affairs committee.

JEROME LAVIGNE-DELVILLE, Director of Standards Development

Jerome Lavigne-Delville is a recognized expert in corporate sustainability,

blending nearly 15 years of experience in corporate law, investment banking

and social responsibility. Most recently, he was a Programme Officer at the

United Nations Global Compact, responsible for sustainability performance,

disclosure and financial markets. In this capacity, he developed a

differentiation program for sustainability performance and reporting for more

than 7,000 companies based in over 140 countries. Prior to the United

Nations, Jerome worked as an investment banker at Bear Stearns & Co, as an attorney in

Mergers & Acquisitions at Shearman & Sterling, and at the World Economic Forum advising

companies in the Media industry. Jerome is a citizen of France and the United States. He

holds an MBA from the NYU Stern School of Business and law degrees in from the U.S., the

Netherlands and France.


DOUG PARK, PhD, JD, Director of Education

Douglas Park has spent his career in academia, business, and law

addressing complex problems that cut across functional and disciplinary

lines.

Most recently, Douglas was a Partner and Chief Sustainability Officer at

Rimon, PC, where he worked with executives, investors, and board

members on corporate governance, corporate and securities law, and

strategy issues. Douglas has litigated securities and financial fraud cases and consulted to

companies on competitive strategy and organizational behavior. The media regularly seeks

Douglas’s thoughts on corporate governance topics. He is frequently invited to speak on

governance and social entrepreneurship.

Before becoming an attorney, Douglas was a tenure track professor of management at Hong

Kong University of Science and Technology, School of Business and Management, where he

taught Strategy, Organization Theory, and Entrepreneurship and received several citations for

teaching excellence. At the Stanford University Continuing Studies Program, he has taught

Starting Startups and Mergers and Acquisitions.

He has served on the Board of Advisers of the Responsible Investment at Harvard Coalition,

as Vice Chair of the American Bar Association’s Governance Research and Education

Subcommittee, and as President of the Harvard Club of Silicon Valley.

Douglas holds a JD from University of Michigan Law School, a PhD in Business from Stanford

Graduate School of Business, and an AB magna cum laude with highest honors in Sociology

from Harvard College.

KATIE SCHMITZ EULITT, Associate Director of Stakeholder Engagement

Katie Schmitz Eulitt has been exploring and making the business case for

sustainable development for over 15 years. Her industry experience is wide-

ranging and includes: finance; oil and gas; electric power; renewable energy;

fine arts, and; public relations. She has lived and worked in 9 countries on 4

continents. Katie earned her B.A. in Japanese at UC Berkeley, an MBA from

Institut Européen d‘Administration des Affaires (INSEAD, France), and a

certificate in Sustainable Management from the Presidio Graduate School. Katie is a board

member of the Orange County Sustainability Collaborative.


BOARD OF DIRECTORS Michael R. Bloomberg* Philanthropist, Founder of Bloomberg LP, 108th Mayor of New York City

Mary Schapiro** Former SEC Chairman

Bob Eccles, PhD Harvard Business School

Jack Ehnes CalSTRS

Steven Gunders, CPA, MBA**** Retired – Deloitte & Touche LLP

Daniel Hanson, CFA Jarislowsky Fraser

Erika Karp, MBA Cornerstone Capital Partners

Peter Knight, JD Generation Investment Management

Suz MacCormac*** Morrison & Foerster LLP

Clara Miller The F.B. Heron Foundation

Catherine Odelbo, MBA Morningstar

Aulana L. Peters, JD Retired – Gibson Dunn & Crutcher LLP, Former SEC Commissioner

Jean Rogers, PhD^ Sustainability Accounting Standards Board

Elisse Walter, JD Former SEC Chairman

Ted White, JD Fahr LLC

* Chair, ** Vice Chair, *** Secretary, **** Treasurer, ^ Ex-Officio

Documents

SUSTAINABILITY ACCOUNTING STANDARDS BOARD · sasb briefing book| 1 table of contents the role of capital markets in our changing world_ a world-class standards-setting organization_