ESG Investing Conference

ESG Investing

Impact Investing Forum

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London. Nov 18-19. (Virtual)

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Impact Investing Conference

SASB issues XBRL taxonomy to improve ESG reporting comparability FM | Financial ManagementSASB issues XBRL taxonomy to improve ESG reporting comparability FM | Financial ManagementSASB issues XBRL taxonomy to improve ESG reporting comparability FM | Financial Management

Impact Investing Conference

The Value Reporting Foundation recently introduced the SASB Standards Taxonomy (XBRL) format to simplify digital reporting for issuers of disclosures related to environmental, social and governance (ESG). This is to make it easier for investors to access data and improve data aggregation.
The taxonomy in XBRL is an open standard for business reporting. It will allow reported metrics to be machine-readable using digital tags and improve the usefulness and comparability ESG reports.
The Value Reporting Foundation was created in June 2012 by the merger of the Sustainability Accounting Standards Board and the International Integrated Reporting Council.
ESG metrics are not comparable across countries and industries. This is a major obstacle to obtaining quality data that can be used for decision-making. The new XBRL taxonomy, which is compatible with the base taxonomies used for financial reporting standards such as IFRS or US GAAP, is an attempt to improve the quality of sustainability reports and their comparability.
Madhu Mathew (director of technology at the Value Reporting Foundation), stated that sustainability reports should be digitally tagged in order for data consumers to easily read them, machines to quickly aggregate information and data to get to analytics platforms easily. “That is our primary goal: to make sure that the supply of sustainability information in SASB standard be efficient and accurately connected with consumers of sustainability information.”
Mathew said that the taxonomy can be extended to meet local requirements for sustainability reporting.
He explained that while you are extending it for local purposes and anchoring it back to the original idea, what you are doing is “what you’re doing is, it’s a continuation of the original idea.” Investors can quickly compare companies globally and say, “OK, this company in Singapore reports something very similar, but is jurisdictionally accommodating.” We offer that flexibility because we do.
Investors are increasingly demanding that businesses disclose sustainability information. This has led to a significant increase in companies disclosing ESG data about their operations and business in the last two years. About 90% of the S&P 500 companies published sustainability reports in 2019. The Value Reporting Foundation reported that there was a 215% increase of companies using the SASB framework to make sustainability disclosures between 2020 and 2021.
The Value Reporting Foundation has released the XBRL taxonomy. This will make reports easier to read. This is important as more organisations are reporting sustainability information using the SASB standards and the integrated framework.
Mathew stated that integrated reporting can be viewed as an overarching roof. There’s financial reporting, and sustainability reporting underneath it. “We hope that the world will adopt this integrated concept. SASB metrics, given their industry-specific application and specificity, create a complete picture when it comes to performance management.
The Value Reporting Foundation announced the creation, in conjunction with the publication of the XBRL taxonomy. This Taxonomy Review Committee will oversee the governance and management of the taxonomy in order to meet the market’s requirements.
Mathew said that there are efforts to determine how to best create a central repository for SASB reports in order to make it easier to find data for report users.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.

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ESG Investing Conference