SASB FSA CHECK YOUR
UNDERSTANDING QUESTIONS AND
ANSWERS
Why are investors demanding quality sustainability information? - Correct Answers -
Investors source quality sustainability information to meet their investment goals. While
investors are generally defined as people or organizations that allocate financial capital
with the goal of achieving a profit, investors are not a monolith. Investment goals and
accompanying strategies may include using the information to achieve above-market
returns, assessing risk to protect against diminished returns and major losses, or
evaluating the predictability of investment outcomes. Whether operating in public or
private markets, the ability of investors to use financially material sustainability
information to achieve enhanced outcomes is evidenced by an increasingly robust body
of independent research. The channels through which investors demonstrate demand
for sustainability information from companies vary, as discussed in Chapter 10.
What are disclosure topics in a SASB Standard, and what purpose do they serve? -
Correct Answers -Disclosure topics are the topics in each SASB Standard that are likely
to have financially material impacts on a company in a given industry. They represent
the industry-specific impacts of General Issue Categories (G.I.C.s). SASB accounting
metrics are used to measure company performance on a disclosure topic.
What are the different types of metrics in a SASB Standard, and what purpose do they
each serve? - Correct Answers -There are two types of SASB metrics: accounting
metrics and activity metrics. Accounting metrics can be either quantitative or narrative-
based discussion and analysis (D&A). Quantitative sustainability accounting metrics are
useful to companies as KPIs and benchmarks, and highly useful to investment
professionals in fundamental and comparative analysis. Meanwhile, discussion and
analysis metrics provide key context where quantitative data might not provide useful
insight into future performance on its own. Activity metrics, on the other hand, do not
measure performance on a particular disclosure topic. Rather, they are used to quantify
the scale of a business to support comparative analysis and are intended to be used in
conjunction with accounting metrics.
How does SASB achieve each of the four fundamental tenets to SASB's approach to
standard-setting? - Correct Answers -The tenets of SASB's approach to standard-
setting are: evidence-based, market-informed, industry-specific, and transparent. SASB
relies on a robust and iterative research process to identify and monitor evidence of
, investor interest and evidence of financial impact associated with each sustainability
disclosure topic using a range of diverse and credible sources. For the Standards to be
market-informed, SASB actively solicits input and carefully weighs the perspectives of
key stakeholders, including reporting companies, investors, creditors, lenders, and
subject matter experts. SASB develops disclosure standards at the industry level. This
is crucial, as sustainability topics affect industries in unique ways. To do this, SASB
relies on the Sustainable Industry Classification System (SICS), which categorizes
industries based on resource use, sustainability impacts, business model, regulatory
environment, and other factors companies share related to sustainability risks and
opportunities. Transparency is embedded throughout the standard-setting process.
During standard-setting, SASB provides stakeholders with insight into the standard-
setting agenda, activities, deliberations, and decisions via key communication
documents, public comment periods, and public board meetings.
What factors drive demand for quality sustainability information within companies? -
Correct Answers -Sustainability data, both qualitative and quantitative, can contribute to
company success in the near, medium, and long term by improving the management of
sustainability-related risks and opportunities. Where key performance indicators (KPIs)
are measured and managed, companies may be better equipped to identify and
mitigate risks, reduce costs, optimize efficiencies, and even increase market share and
revenue growth through new products and services. Indeed, by demonstrating an ability
to manage sustainability-related risks and opportunities to bolster company
performance, companies can leverage sustainability disclosure to effectively
communicate with investors and improve cost of capital. Simply put, demand for
sustainability information within companies is often (though not always) driven by the
goal to improve bottom-line performance
Besides companies and their investors, what other institutions influence demand for
sustainability information across capital markets? - Correct Answers -The performance
benefits that investors and companies experience when integrating sustainability
information into their decision-making processes are not the only factors driving demand
for sustainability information. Other organizations, both public and private, influence the
global ESG. dialogue. International, national, and local policy-based initiatives stimulate
sustainability disclosure by passing recommendations and guidance, as well as
regulatory requirements, for the disclosure of sustainability information from publicly-
listed companies. Non-policy efforts, particularly those initiated by securities exchanges
and industry associations, increasingly encourage sustainability disclosure among
listees and members.
Why was disclosure the basis of regulatory reform in the wake of the 1930's stock
market crash? - Correct Answers -The stock market crash of 1929 sent shockwaves
throughout global markets, leading to global economic declines and the onset of the
Great Depression in the United States. The event provides perhaps the most striking
example of how lack of transparency in capital markets can have disastrous
consequences - harming socioeconomic well-being, bankrupting companies, and
eroding investors' confidence in the information they rely on from companies to make
UNDERSTANDING QUESTIONS AND
ANSWERS
Why are investors demanding quality sustainability information? - Correct Answers -
Investors source quality sustainability information to meet their investment goals. While
investors are generally defined as people or organizations that allocate financial capital
with the goal of achieving a profit, investors are not a monolith. Investment goals and
accompanying strategies may include using the information to achieve above-market
returns, assessing risk to protect against diminished returns and major losses, or
evaluating the predictability of investment outcomes. Whether operating in public or
private markets, the ability of investors to use financially material sustainability
information to achieve enhanced outcomes is evidenced by an increasingly robust body
of independent research. The channels through which investors demonstrate demand
for sustainability information from companies vary, as discussed in Chapter 10.
What are disclosure topics in a SASB Standard, and what purpose do they serve? -
Correct Answers -Disclosure topics are the topics in each SASB Standard that are likely
to have financially material impacts on a company in a given industry. They represent
the industry-specific impacts of General Issue Categories (G.I.C.s). SASB accounting
metrics are used to measure company performance on a disclosure topic.
What are the different types of metrics in a SASB Standard, and what purpose do they
each serve? - Correct Answers -There are two types of SASB metrics: accounting
metrics and activity metrics. Accounting metrics can be either quantitative or narrative-
based discussion and analysis (D&A). Quantitative sustainability accounting metrics are
useful to companies as KPIs and benchmarks, and highly useful to investment
professionals in fundamental and comparative analysis. Meanwhile, discussion and
analysis metrics provide key context where quantitative data might not provide useful
insight into future performance on its own. Activity metrics, on the other hand, do not
measure performance on a particular disclosure topic. Rather, they are used to quantify
the scale of a business to support comparative analysis and are intended to be used in
conjunction with accounting metrics.
How does SASB achieve each of the four fundamental tenets to SASB's approach to
standard-setting? - Correct Answers -The tenets of SASB's approach to standard-
setting are: evidence-based, market-informed, industry-specific, and transparent. SASB
relies on a robust and iterative research process to identify and monitor evidence of
, investor interest and evidence of financial impact associated with each sustainability
disclosure topic using a range of diverse and credible sources. For the Standards to be
market-informed, SASB actively solicits input and carefully weighs the perspectives of
key stakeholders, including reporting companies, investors, creditors, lenders, and
subject matter experts. SASB develops disclosure standards at the industry level. This
is crucial, as sustainability topics affect industries in unique ways. To do this, SASB
relies on the Sustainable Industry Classification System (SICS), which categorizes
industries based on resource use, sustainability impacts, business model, regulatory
environment, and other factors companies share related to sustainability risks and
opportunities. Transparency is embedded throughout the standard-setting process.
During standard-setting, SASB provides stakeholders with insight into the standard-
setting agenda, activities, deliberations, and decisions via key communication
documents, public comment periods, and public board meetings.
What factors drive demand for quality sustainability information within companies? -
Correct Answers -Sustainability data, both qualitative and quantitative, can contribute to
company success in the near, medium, and long term by improving the management of
sustainability-related risks and opportunities. Where key performance indicators (KPIs)
are measured and managed, companies may be better equipped to identify and
mitigate risks, reduce costs, optimize efficiencies, and even increase market share and
revenue growth through new products and services. Indeed, by demonstrating an ability
to manage sustainability-related risks and opportunities to bolster company
performance, companies can leverage sustainability disclosure to effectively
communicate with investors and improve cost of capital. Simply put, demand for
sustainability information within companies is often (though not always) driven by the
goal to improve bottom-line performance
Besides companies and their investors, what other institutions influence demand for
sustainability information across capital markets? - Correct Answers -The performance
benefits that investors and companies experience when integrating sustainability
information into their decision-making processes are not the only factors driving demand
for sustainability information. Other organizations, both public and private, influence the
global ESG. dialogue. International, national, and local policy-based initiatives stimulate
sustainability disclosure by passing recommendations and guidance, as well as
regulatory requirements, for the disclosure of sustainability information from publicly-
listed companies. Non-policy efforts, particularly those initiated by securities exchanges
and industry associations, increasingly encourage sustainability disclosure among
listees and members.
Why was disclosure the basis of regulatory reform in the wake of the 1930's stock
market crash? - Correct Answers -The stock market crash of 1929 sent shockwaves
throughout global markets, leading to global economic declines and the onset of the
Great Depression in the United States. The event provides perhaps the most striking
example of how lack of transparency in capital markets can have disastrous
consequences - harming socioeconomic well-being, bankrupting companies, and
eroding investors' confidence in the information they rely on from companies to make
