The Sustainability Accounting Standards Board has issued provisional standards for seven industries in the financial services sector.
The industries include asset management & custody activities, commercial banks, consumer finance, insurance, investment banking & brokerage, mortgage finance, and security & commodity exchanges.
The provisional SASB standards aim to help corporations comply with existing regulations requiring that all material issues must be reported on a Form 10-K to the Securities and Exchange Commission. SASB standards are intended to address nonfinancial issues that have a material impact on financial services companies, such as systemic risk management in banking, responsible lending in mortgage finance and integration of environmental, social and governance factors in investment management.
Last year, SASB released provisional standards for the health care sector (see SASB Releases Sustainability Accounting Standards for Health Care Sector).
The SASB standards-setting working groups for the financial services sector involved representatives from publicly traded companies with more than $1.3 trillion in market capital. Examples of issues included in the provisional standards are customer privacy and data security; integration of ESG factors in credit risk analysis, investment management and advisory; and responsible lending and debt prevention.
SASB standards—which identify the minimum set of sustainability issues for each industry—are designed to be cost effective for companies to implement and useful for investors when making decisions on investment choices. SASB estimates that the average number of sustainability issues in each Financials standards is four and 79 percent of suggested accounting metrics are quantitative.
“The financials sector is unique, in that it’s comprised of both issuers and investors,” said SASB executive director Dr. Jean Rogers in a statement. “As issuers, financials companies can compete and improve performance on the sustainability issues most relevant to business success. As investors, financials companies can compare corporate performance on material sustainability issues and direct capital accordingly.”
SASB’s standards development process includes research supported by Bloomberg data, multi-stakeholder industry working groups, a public comment period, and review by an independent Standards Council. The working groups for the financials sector—which included 302 survey responses—represented publicly traded companies with more than $1.3 trillion market capital and investment firms with more than $5 trillion in assets under management. A full list of working group members can be found here.
SASB’s standards for the Financials sector will be considered provisional for one year after the issuance date. SASB is asking for feedback on the standards during the provisional phase.
Companies seeking assistance using SASB standards are invited to apply to the SASB Corporate Roundtable. SASB standards will be developed for 80+ industries in 10 sectors through the beginning of 2016. The full schedule of SASB’s standards development process is available here.