Mobilizing Capital

Changing the World

“If every foundation in the world put all of its investments into impact investing, it would still amount to only about 1 percent of the assets under management. So we have to think of ways to be influential outside our own terrariums.” CLARA MILLER, PRESIDENT, THE F.B. HERON FOUNDATION

In the financial markets, transparency serves as an economic engine, by allowing investors to allocate resources more efficiently and productively. Put simply: Better data leads to better decisions. Today, investors examine companies with greater sophistication than ever before, and one of the new variables they consider is sustainability. Investors want to know which automobile companies are leaders in developing alternative fuel vehicles. They want to know how hardware companies are addressing the sourcing of rare earth minerals. They want to know the vulnerability of companies’ assets to rising sea levels and intensifying storms.

© ANDREAS POIKE/FLICKR; INSET: © RUBENSTEIN

The trouble is, investors don’t have ready access to this information— but they should, and they are right to demand it. SASB aims to provide investors with comparable, standardized data on sustainability risks and opportunities, to help them make investment decisions that are better informed, and to help produce markets that better reflect actual conditions. Over the past several decades, a data revolution has dramatically changed financial markets. But the revolution is far from over. I invite you to learn more about SASB’s work and join me in supporting an initiative that has the potential to improve the functioning of capital markets—and by doing so, strengthen our economic and environmental future. Sincerely, Michael R. Bloomberg Chair SASB Board of Directors

Taking Stock A changing climate. A growing population. Diminishing natural resources. No industry is immune to the global megatrends we see today. But imagine if all 13,500 publicly traded companies managed and measured the sustainability issues that mattered most. If investors were able to drive capital to improved environmental, social, and governance outcomes. If society could benefit from improved corporate performance. Since 2012, the Sustainability Accounting Standards Board (SASB) has been working to make this scenario a reality. How will this transform our capital markets?

2 | sasb.org

“SASB’s approach is elegantly and practically designed. The engagement process used to develop its standards is a model others should follow. Its standards have great potential to make a significant difference to globally important issues.” — Sarah Teslik, Senior Vice President, Apache —

Transforming Gifts Into Action Since 2012 BUILDING CAPACITY Our Board of Directors and Standards Council members represent asset owners, portfolio managers, assurance professionals and legal experts, among others. Our supporters include the F.B. Heron Foundation, TomKat Charitable Trust, and the Gordon and Betty Moore Foundation.

DEVELOPING STANDARDS Provisional standards for 79 industries will be available by 2016.

ENGAGING THE MARKET

© AMY PERL

Our standards are developed via rigorous research and balanced stakeholder input. More than 2,800 participants— representing $23.4T in assets under management and $11T in market capitalization—helped develop our provisional standards.

sasb.org | 3

“One of the most exciting developments in sustainable investing has been the upgrade in the quality of company data that identifies companies with strong strategies. Traditional financial information is governed by accounting rules…a new, powerful body called SASB is doing the same for sustainability data and disclosure.” — Bruno Bertocci, Managing Director, UBS —

4 | sasb.org

It All Starts with Standards The sustainability issues that affect financial performance vary by industry. Counterfeit drugs impact pharmaceutical companies. Greenhouse gas emissions affect oil and gas companies. Data security matters to online retailers. For this reason, SASB sets standards at the industry level. By 2016, provisional standards will be available for 79 industries. The standards are designed for disclosure in SEC filings.

© PATRICIA HOFMEESTER/CREATIVE MARKET

SASB standards are the first that enable investors to compare sustainability performance within an industry. Our unique industry-specific approach, focus on U.S. public equities, and compatibility with U.S. securities law set us apart.

Mobilizing Capital, Changing the World | 5

Surfacing the Issues that Matter Through our standards-setting process, we’ve identified significant, cross-cutting issues. While these issues affect different industries in different ways, SASB research shows that no industry is unaffected. We set out to develop sustainability standards for publicly listed U.S. companies because we understand the impact of capital markets in our changing world. Philanthropic support provided the resources we needed to accomplish this goal. Now it’s time to leverage what these standards can do for markets, society, and the world.

6 | sasb.org

Relevance of Cross-cutting Issues on Industries Number of Industries Analyzed

Climate Change

Product Alignment & Safety

Resource Intensity & Scarcity

Water Management

Access & Affordability

Financing & Responsible Lending

Health Care

6

6

6

5

3

5

0

Financials

7

6

6

0

0

3

3

Technology & Communication

6

6

4

6

4

0

0

Non-Renewable Resources

8

8

3

7

7

0

0

Transportation

8

8

3

7

0

0

0

Services

10

6

6

6

2

1

1

Resource Transformation

5

5

5

5

2

0

0

Consumption I

7

6

7

6

6

0

0

Consumption II

8

7

6

6

3

0

0

Renewable Resources

6

6

4

6

2

0

0

Infrastructure

8

8

8

6

3

1

0

TOTAL

79

72

58

60

32

10

4

$36.1 trillion

$33.8 trillion

$29.1 trillion

$26.9 trillion

$18 trillion

$8.3 trillion

$3.9 trillion

93%

80%

75%

50%

23%

11%

100-75%

74-51%

50-25%

24-0%

Market Cap % Impact of All Industries

Mobilizing Capital, Changing the World | 7

“I, for one, welcome SASB and will look forward to the day when we have really changed the reporting game.”

8 | sasb.org

© SASB

— Susanne Stormer, Vice President, Novo Nordisk —

The Next Chapter: Scaling Our Impact Developing provisional standards for 79 industries in 10 sectors was just the beginning. Attaining the type of market evolution the world needs requires education on, and adoption of, these standards. We are at an inflection point; at the cusp of transforming the course of our capital markets and the state of our world. In order to build on our momentum, SASB needs to raise $30 million in philanthropic support to: • Maintain and codify standards for 79 industries in 10 sectors; • Facilitate the adoption of SASB standards by companies and investors; • Provide an educational program for traditional market actors. Join us in mobilizing capital to change the world.

100 80 Adoption %

High-Touch Corporate Engagement Top 3 companies in every industry

Intermediary Activation

Investor Demand

Industry Endorsement

Listing Requirements

10%

20%

30%

80%

of market engaged through sector leaders at Big 4

of market engaged due to investor demand and investible products

of issuers engaged once standards codified and industry associations adopt

of issuers engaged

30 10

Mobilizing Capital, Changing the World | 9

The Imperative of Adoption Our standards weren’t created to sit in reports—they’re designed to be used for decisionmaking by issuers and investors. This means widespread adoption. Just as today’s publicly traded companies look to standards created by the FASB in reporting their financial data, companies will start turning to standards created by SASB in reporting their sustainability data. When all public companies report using SASB standards, investors can drive capital to the most sustainable outcomes. We need the sheer power of the capital markets to address the most pressing sustainability issues of our time.

U.S. Foundations Total Assets $788 billion Foundation Assets That Apply ESG criteria $60 billion

10 | sasb.org

U.S. Capital Markets Total Assets $33.3 trillion

“As the world’s largest teacher-only public pension fund, we want to know how companies are addressing and planning for risk. We want to hold companies and their boards accountable for responsible management. By integrating financial and sustainability disclosure in the Form 10-K, SASB is making it easier for us to fulfill this mission.”

© NACROBA/CREATIVE MARKET

— Anne Sheehan, Director of Corporate Governance, CalSTRS — ­

sasb.org | 11

Earned Income: The Future of SASB Philanthropic support empowered SASB at the beginning of this marathon— and it is needed to help SASB continue to accomplish its mission. As an organization, SASB seeks to transition to a majority (80 percent) earned-income funding model by 2019, when we expect the following products to account for the majority of the revenue generation: •

Credential exam fees



Annual conferences



12 | sasb.org

T  ools & partnerships featuring licensed SASB intellectual property

Projected Revenue, 2015-2019 Earned Income + Grants vs. Expenses 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000

2015 Fundraising

2016 Education

2017 Tools & Partnerships

2018

2019

Outreach

Expenses

Tools & Partnerships 8% Education 32%

Fundraising 60%

Mobilizing Capital, Changing the World | 13

“The FSA Credential Level I exam is the only professional credential to demonstrate expertise in understanding how sustainability information can be material to a company’s performance.”

14 | sasb.org

COURTESY OREGON DEPT. OF TRANSPORTATION

— Steve Mezzio, former partner, audit and risk assurance, PwC —

Educating Traditional Players in a New Game: Preparing the Next Generation of Leaders Investors must understand how material sustainability information impacts investment analysis. Securities lawyers need to understand the issues enough to provide counsel on material sustainability information. Assurance providers must recognize risk and comply with SEC regulation in order to advise their clients. This starts with education. SASB’s Fundamentals of Sustainability Accounting (FSA) Credential teaches professionals how to identify, quantify, communicate, and analyze material sustainability information.

© SASB

At no other time has this type of education been more valuable.

Mobilizing Capital, Changing the World | 15

Changing the Course of the Future—Today In a short period of time, SASB has developed standards that our markets need to address today’s sustainability challenges. Only through philanthropic support were we able to transform our research into standards. Only through philanthropic support will we be able to mobilize standards into action. More reporting? No. Better reporting? Yes. This is about reducing reporting to its essential elements so companies can improve performance on the issues that matter most. It’s about moving from transparency to performance. This is the heart of SASB’s work. We have an opportunity to change the trajectory of today’s biggest global challenges. It requires understanding how the issues impact our businesses and incorporating this knowledge into management and investment decisionmaking. That’s when we will achieve transformational change. This is what we want our legacy to be—join us in making it a reality.

16 | sasb.org

“Never underestimate the power of a small group of people to change the world.” — Margaret Mead, Cultural Anthropologist —

Mobilizing Capital, Changing the World | 17

SASB’s Origins: Better Societal Outcomes Driven By the Markets The idea for SASB originated in 2010 at the Initiative for Responsible Investment (IRI) at Harvard University. A group of researchers, including SASB CEO & Founder Dr. Jean Rogers, identified the need for industry-specific sustainability reporting, and developed a method for identifying the most relevant issues for every industry. The results were published in a paper called From Transparency to Performance. Due to the overwhelming response generated by the paper, the researchers began exploring ways to develop a full set of industry standards, including the creation of an independent 501(c)3 nonprofit. The Sustainability Accounting Standards Board was developed and incorporated in July 2011. As a female social entrepreneur, Dr. Jean Rogers transformed SASB from an idea into a globally-respected, ANSI-accredited, independent standards-setting organization.

18 | sasb.org

© AMY PERL

As CEO, Jean is responsible for the strategic direction and overall leadership of the organization. Jean draws upon her 20 years’ experience in sustainability and management consulting across a wide range of industries including utilities, extractives, financials, and real estate. Jean’s leadership experience includes 10 years as a Principal at Arup, a global engineering consultancy focused on sustainable development. Jean was also a management consultant at Deloitte. Jean is a former Loeb Fellow at Harvard University and holds a PhD in Environmental Engineering from the Illinois Institute of Technology, and an ME in Environmental Engineering and a BE in Civil Engineering from Manhattan College. In 2015 she was named one of the Top 100 Most Influential People in Accounting by Accounting Today and one of the Most Powerful Women in Accounting by CPA Practice Advisor.

sasb.org | 19

SASB Board of Directors Michael R. Bloomberg* Former Mayor, New York City Mary Schapiro** Former Chairman SEC Audrey Choi CEO Morgan Stanley Institute for Sustainable Investing Jack Ehnes CEO CalSTRS Steven O. Gunders, CPA, MBA Partner Deloitte & Touche LLP – Retired Dan Hanson, CFA Director of U.S. Equities Jarislowsky Fraser USA Robert Herz Former Chair FASB * Chair ** Vice Chair

20 | sasb.org

Erika Karp CEO Cornerstone Capital Inc. Shawn Lytle President Delaware Investments Clara Miller President The F.B. Heron Foundation Catherine Odelbo Executive Vice President Corporate Strategy & Partnerships Morningstar, Inc. Kevin Parker CEO SICM Aulana Peters Partner Gibson, Dunn & Crutcher LLP – Retired

Arnie Pinkston Executive Vice President and General Counsel Allergan Curtis Ravenel Global Head Sustainable Business & Finance Bloomberg LP Jean Rogers, PhD PE CEO and Founder, SASB Ex Officio member of SASB Board Laura Tyson, PhD Professor of Business Administration & Economics Haas School of Business Elisse Walter Former Chairman SEC Edward D. “Ted” White Managing Partner Fahr LLC Management Partner Moye White LLP

Change Starts With You Here are ways you can join us in our mission to mobilize capital­—and in doing so, change the world: •U  se SASB standards to align your corpus with your philanthropic beliefs • Support SASB’s education programs • Give to SASB

sasb.org | 21

22 | sasb.org

sasb.org

(415) 830-9220 1045 Sansome Street, Suite 450 San Francisco, CA 94111