The Link between SASB Standards and MSCI

Dec 22, 2022

Share

Copy Url

What are the SASB Standards?

SASB Standards

The Sustainability Accounting Standards Board or SASB was the board previously leading the development and promotion of the SASB Standards.

The SASB Standards help companies by guiding them on the process of disclosing financial material sustainability information to investors.

With 77 industry-specific standards, the SASB standards help companies identify the Environmental, Social, and Governance issues that are most relevant to the financial performance of the reporting company.

Recent developments

More recently, effective 1st August 2022, the Value Reporting Foundation (VRF) which promoted the SASB Standards, consolidated into the International Finance Reporting Standards (IFRS) Foundation. The IFRS Foundation now has oversight of the SASB Standards and is in charge of integrating the SASB standards’ industry-based approach with the newly established International Sustainability Standards Board’s (ISSB) development process.

The ISSB is now responsible for encouraging the adoption of the SASB standards by companies as a means of reporting on financially material ESG issues to their investors.

Industry-specific examples of material issues

The issues themselves vary from one industry to the next and even between companies from within the same industry. As trends in financial performance reporting change, newer material information need to be reported so that investors can make the most informed decisions when deciding on investing in a company.

For example, data security comes under a social issue and would be important to the software industry whereas a beverage company would find water management, an environmental issue, as more material to its financial sustainability. Additionally, for an investment bank, a governance issue such as managing conflict of interest or transparency in their investment decision-making process would be of critical importance.

Key highlights of SASB Standards

To summarise, SASB standards help in the reporting of ESG issues that are most likely to impact (positively or negatively) the financial performance of a company in a particular industry.
SASB Standards are industry-based as the issues would vary from one industry to the next and this allows the reporting of information that is most useful in the decision-making process of investors.
The SASB Standards, over the years, are quite cost-effective for companies to use and had been developed using an evidence-based and market-informed process similar to those used to develop financial accounting standards.
The SASB Standards also ensure that investors can easily compare information between companies and industries. Therefore, resulting in better-informed investment decisions, and higher levels of transparency and trust between companies and investors.

What is MSCI?

Morgan Stanley Capital International

The MSCI or Morgan Stanley Capital International is an investment research firm that provides services to institutional investors and hedge funds. These services include stock indexes, portfolio risk, and performance analytics, and governance tools.

MSCI’s Purpose

The purpose of MSCI is to bring greater transparency to global financial markets by enabling the investment community to make better decisions.

How does MSCI work?

This is possible by providing critical decision support tools and services to investors. The firm has over 50 years of expertise in research, data, and technology that allows investors to better understand risks and returns and therefore, ensure more effective portfolios are built.

MSCI Solutions

The MSCI has a range of solutions falling under the categories of Analytics, Climate Investing, ESG Investing, Factor Investing, Indexes, and Real Assets. There is an extensive range of innovative solutions under each category that can be viewed on their website here.

MSCI Research and Insights

Other services provided include research and insights into the climate, ESG, equities, factor investing, fixed income, Multi-asset class, and Real estate.

MSCI Technology

Additionally, MSCI also provides technology tools such as the Data Explorer that help investors by providing them with high-quality data sets and therefore gain deeper insights at every point of their investment process.

The Developer Community is a searchable directory of MSCI’s APIs. Asset managers and institutional investors use APIs to decide strategy, improve offerings, and scale businesses. This is done by leveraging and harnessing the power of data to gain better insights, design products, and serve clients.

To summarise, MSCI provides services, solutions, and technology products that can help investors harness huge amounts of data, integrate them to gain better insights, and therefore, ensure higher investment transparency and more well-rounded portfolios. These services and solutions factor in ESG and climate-related data which are crucial in this era of responsible investing.

SASB and MSCI

The obvious question then is, what is the link between the SASB Standards and the MSCI?

Summarising SASB and MSCI

Well, to begin with, let's just summarise that the SASB Standards are designed to ensure better reporting of ESG issues that are material to the financial performance or value-generating sustainability of a company.

Whereas the MSCI is a research firm that provides investors and investment institutions with the tools and means to accrue better data so that their investment decisions improve while also, significantly, increasing transparency with the global investment community.

MSCI’s SASB-aligned Report

The MSCI has itself led the way in this transparency by creating reports based on SASB standards and therefore, practicing what they preach! As can be viewed here, the MSCI has made SASB-based reports since 2020. They fall under the industry of “Professional and Commercial Services” of the SASB framework.

The material issues to MSCI, as per the SASB framework, include data security, workforce diversity & engagement, professional integrity, etc.

Other Standards-based Reports by MSCI

At this point, it is pertinent to note that MSCI drives transparency by reporting on SASB standards but additionally also publishes reports using CDP, Task Force on Climate-related Financial Disclosures (TCFD), and Emissions metrics.

In Conclusion

While a reader can delve much deeper into each of these boards, standards, and firms – we hope that this gives a basic juxtaposition between SASB Standards and MSCI.

Admittedly, this can seem confusing to companies but the crucial takeaway is that SASB standards guide companies on how to best standardize their reporting with the help of the framework.

MSCI, by itself, is not a standard or a framework but a firm that provides companies and investors with the best tools and solutions to achieve the highest level of transparency in the investment world. As importantly, these tools ensure that investors make the best decisions from a returns point of view and therefore create value and wealth for the global economy.

For companies looking to take the first step into more transparent disclosures, greater quality in reporting, and understanding the myriad tools available to achieve this – we would recommend hiring 3rd party agencies.
There are specialized corporate reporting agencies, like Report Yak, that have an expert content team that can benchmark your report and ensures they are aligned with the international standards your organization wishes to follow. This, combined with our experienced and creative design team can ensure that your next annual or integrated report is consistent, concise, accessible, and highly readable while also boosting transparency and trust in your company among stakeholders and investors. 

Get in touch to discuss your next report and get a quote at the same time.