We have always viewed SASB standards as important market infrastructure to help investors integrate environmental, social, and governance (ESG) factors into decision making in a rigorous, scalable way. Today, our licensing partners are bringing SASB’s vision of materiality-based ESG investing to life with innovative applications of the standards and related intellectual property.
Because indices and the funds that track them represent an important opportunity for investors to allocate capital in alignment with SASB’s financial materiality-based approach to ESG investing, we are pleased to license SASB standards for the creation of indices and investible products. We approach these agreements with a few guiding principles:
- SASB contributes the industry standards but SASB does not rate company performance on the standards. Rating, ranking, and scoring is the role of licensees.
- SASB works with multiple providers, each of which makes its own judgments about applying the standards in investment decisions.
- SASB encourages licensees to build products based on company performance—not transparency alone.
With the launch of the Bloomberg SASB ESG index family in September 2019, SASB has begun to receive questions from companies about the index, its underlying methodology, and SASB’s role.
No. The Bloomberg SASB ESG index family incorporates R-Factor™, an ESG scoring system developed by State Street Global Advisors. In generating a unique ESG score for listed companies, R-Factor™ leverages SASB standards—which are focused on the subset of ESG factors most likely to have material financial impacts on a company in a given industry—to screen performance data from multiple sources. This ensures R-Factor scores are driven by the ESG factors most important to investors.
SASB standards were officially issued for use by companies and investors in November 2018. Given their recent release and the voluntary nature of such disclosure, many companies have not yet incorporated the standards into their reporting practices. Thus, R-Factor™ leverages data from multiple providers and identifies those that are either identical to or reasonable proxies for the performance metrics included in the SASB standard for a given industry.
Companies interested in receiving their R-Factor™ scores should contact State Street Global Advisors.
Bloomberg will post the index weights of component companies daily on the Bloomberg Professional Service. Users can access this information by entering MEMB <GO>. Additionally, Bloomberg will publish the top 10 company weights on a quarterly basis, available in the relevant fact sheets.
Potentially. Although R-Factor™ is primarily focused on a company’s level of performance rather than its level of disclosure, the more a company’s ESG reporting focuses on specific SASB metrics—as opposed to not disclosing information or using non-comparable metrics—the more likely it is to improve its R-Factor™ score over time. This should, in turn, influence a company’s weight in one or more Bloomberg SASB ESG indices.
There is a range of SASB-powered indices in various stages of planning and development. One other example in the market today is ET Research’s Engaged Tracking Low Carbon Index Series, the only low-carbon index series on the market that is based on a public, transparent carbon ranking of each constituent company.