Newsmaker: New CEO of SASB Foundation Seeks Buy-in of Board’s Sustainability Standards

By:
Chris Gaetano
Published Date:
May 13, 2019

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In February, Madelyn Antoncic was appointed the new global CEO of the SASB Foundation, an independent nonprofit organization responsible for the funding and oversight of the Sustainability Accounting Standards Board (SASB). Antoncic previously served as executive director and global head of official sector partnerships at Principal Global Investors. From 2011 to 2015, she served as vice president and treasurer of the World Bank, after holding a variety of executive positions at Lehman Brothers, Barclays Capital and Goldman Sachs & Co. Antoncic took the time to respond to questions from The Trusted Professional about her views on sustainability and her priorities as CEO. The Q&A has been edited for length and clarity.

How did you come to be interested in sustainability topics? What sparked it for you?

I’ve always been a markets person, and in my view, sustainability goes hand in hand with risk management. I’ve spent my career studying and managing risk, value creation and economic policy, and I look for opportunities to leverage that experience to drive innovation in financial markets that can facilitate broad, inclusive economic growth.

Sustainability started to become a real focal point in my career at the World Bank when thinking about catastrophic risk, developing innovative climate-related risk mitigation plans and executing financial structures for countries. I’ve spent the bulk of my career leveraging the power of financial markets to help the global economy absorb and transfer risk. This is one of many reasons I’m eager to bring my perspective to global capital markets with the SASB Foundation.

Sustainability can be a rather broad topic, with a lot of different interpretations about what it means for a company to be sustainable. How do you understand sustainability? What do you think of when you say a company has sustainable practices?

All companies aspire to be “sustainable,” meaning to still be around 5, 10, 25 years in the future. And in order for companies to be sustainable, they need to not only grow and continue to make a profit—they also have to mitigate risk and be mindful of the long-term availability of the resources that enable their businesses to run and are necessary to create their products.

The way I see it, in the context of business, sustainability—along with environmental, social and governance (ESG) criteria—is simply a 21st century extension of traditional risk management. Because it’s the new face of an old problem, it’s ripe for rigorous interrogation through existing approaches like scenario analysis and stress testing, as well as through new, innovative methodologies.

The SASB standards enable corporations to more effectively measure, manage and inform their ability to mitigate or, where appropriate, eliminate material ESG-related risk exposures, thereby creating enhanced financial performance. This includes not only a company’s own, internal risks, but those throughout its value chain. That’s because every company is both a supplier and consumer of resources with considerable influence in both directions—upstream and downstream. In that kind of environment, even a company’s specific, idiosyncratic risks can spread.

You have been a keen observer of the corporate sustainability movement for many years. What has been your biggest critique of this movement, and how do you intend to do things differently as leader of the SASB?

For me, the biggest critique is the fractured nature of the market for ESG information—from investors to governments to consumers and customers—and the number of reporting frameworks, which makes it difficult to decide where to start the sustainability reporting process. When one considers the overall universe of sustainability information that could be relevant for all corporate stakeholders, it can seem overwhelming. What excites me about the SASB is the opportunity to help clearly articulate the SASB’s role as providing financially material information to investors around the globe. By being more precise in circumscribing which information and which stakeholder group to consider, we can make it much easier for companies.

Conversely, where do you think it has been most successful? What gives you the most hope for the future? 

By almost every measure, investors’ recognition of the importance of ESG performance, and their demand for better transparency around sustainability information, has surged. Asset owners and asset managers are pushing companies to better articulate their long-term strategies, using metrics that go beyond the traditional financial accounts. Companies have stepped up their reporting throughout the world, as the markets are clearly on a journey to improve the communications to investors. The SASB’s sector approach aligns well with these market forces, and the SASB’s due process embeds the practice of bringing together investors and companies, which helps the standards board develop cost-beneficial standards.

What do you think is the biggest hurdle to getting more buy-in from the investment community on the SASB’s standards? Is it a marketing or awareness issue? Is it an ideological one? Is it skepticism about results? A concern about profit impacts?

As you could probably infer from my last answer, investor buy-in is swelling! As I said before, investor demand for sustainability information is soaring, and so is investor support for the SASB. Forty of the largest asset owners and managers in the world are members of the SASB’s Investor Advisory Group (IAG), with approximately $30 trillion in assets under management collectively. We have seen more and more asset managers bring in-house sustainability staff to embed ESG into the investment process, as asset owners have evolved to engage with their fund managers on these topics. A tipping point in the United States specifically has occurred, as large index funds, which are passive investors, now engage with companies regularly and have publicly called on CEOs to provide better information on their ESG profiles. The SASB is well positioned, as its standards are investor-focused; its sector approach is familiar to investors, and that approach can be applied globally and across asset classes.

What are your three biggest priorities as the new CEO, in terms of running and growing the organization?

First and foremost, I plan to continue to demonstrate the SASB’s brand as a credible and respected standard setter that produces world-class work, and to create more visibility and awareness in the global capital markets of SASB standards as a roadmap for material sustainability factors that inform investment decisions. I plan to do this through a variety of channels, but primarily by going out and speaking in the global markets, whether in the United States, Europe, Japan, Singapore or Australia—if there’s a market ripe for reform in sustainability reporting, I’ll be there.

Second, which is dependent on our primary goal, I want to achieve corporate use of the SASB standards for sustainability disclosure to investors. The SASB’s objective will be best met if corporations use the standards and report the outcomes and thus communicate to investors. By communicating with corporations and demonstrating to them how investors are already using the SASB standards in their existing decision-making processes, we can encourage corporations to use the standards and report.

Last, I intend to guide the organizational strategy and oversight to achieve the SASB’s mission, goals and objectives, and continue to build the capacity of our organization. Capacity means everything, from adding new hires to the professional development of our current team.

Risk analysis and management make up a great part of your background, since you oversaw these areas during your time at Goldman Sachs, Barclays Capital and Lehman Brothers. How do you think this background informs the work you are doing at the SASB?

Risk analysis and management are all about ensuring that the company isn’t shaken off course building long-term value for stakeholders. The SASB’s vision is a world where a shared understanding of corporate sustainability performance allows companies and investors to make informed decisions that drive value and improve sustainability outcomes. It seems to me that the SASB’s work is a natural extension of my prior efforts.

You were also the former vice president and treasurer of the World Bank. Where do you think the interests of large nongovernmental organizations like the World Bank and IMF align with the SASB’s goals? Conversely, are there areas where there might be conflicts that may need to be negotiated?

At the World Bank and most other multilateral development banks and organizations, ESG is embedded in their culture and mission. Adhering to best practices with respect to sustainability, equality and shared prosperity, for example, is a precondition to the World Bank making loans to countries—whether those loans are Project Loans, such as those used to build roads or hospitals, or Development Policy Loans, which are for general budgetary support; so the multilaterals’ and the SASB’s interests are aligned. The SASB can influence sustainability through markets and the private sector by developing the infrastructure that can support a more robust and resilient global economy.

In general, how do you think your experiences at the World Bank, which gave you the opportunity to observe the global economy on a macro scale, inform and aid your work at the SASB?

The World Bank is a cooperative owned by 189 countries with a full-time sitting board of 24 chairs. Over 150 different nationalities work at the bank. So, one very important experience was working in a multicultural, multistakeholder environment. At the SASB, we need to engage with many stakeholders to try to influence an outcome, which is to encourage investors to use our standards and corporations to report on our standards, which allows investors to allocate capital to the most efficient users of that capital and ultimately will lead to a more sustainable economy. Other experiences I had at the bank were in the practical application of mitigating risks, some of which the SASB’s standards are designed to measure. I was also an early advocate of establishing global standards for Green Bond issuers using the World Bank’s convening power and position as the bank, along with the European Investment Bank, that started the Green Bond market. So I have provided thought leadership on global issues that are important to the SASB, from greening the financial system to climate-induced risk mitigation and other critical issues all related to sustainability.

Do you think of sustainability reporting using SASB standards to be part of the larger financial reporting ecosystem, or do you think of it as something that may intersect the financial reporting world in places but remains its own realm?

To me, sustainability reporting is the next evolution of financial reporting—it’s all part of a larger ecosystem, as you say. First, there is investor demand for broader accounting of the risks in a company. Second, concepts and tools such as the SASB standards  have evolved to make it feasible to identify and measure financially material sustainability risks, including carbon footprints and emissions. This is an important milestone in how we see and manage a broader range of real risks.

The intended audience for SASB standards, for the most part, is the investment community, so they can better assess a company’s sustainability practices and use that information to make more money. With this in mind, do you view the SASB framework as working in concert with other groups with different intended audiences, such as the Global Reporting Initiative (GRI) or the International Integrated Reporting Council (IIRC)? Or do you view the investment community as more relevant to these matters and so choose to focus there? 

First, I should point out that SASB standards are not made for investors so they can make more money. The SASB provides tools that can help companies to identify opportunities in their strategic planning as well as to identify business-critical aspects of the emerging and evolving set of material ESG risks, which include the potential for significant tail-risk events. By identifying ESG risks, companies can inform their thinking on managing and mitigating those ESG risks; in turn, by reporting the “key risk indicators” identified by the SASB, investors can use this decision-useful information to allocate capital to the most efficient users of that capital. Together, this group of increasingly risk-aware market participants can foster economic growth that is both sustained and sustainable.

In terms of whether the SASB’s framework works in concert with other groups with different intended audiences—to me, this is all very simple. It isn’t an “either, or” choice. The SASB’s focus on investors makes it an ideal stand-alone tool for companies wishing to report to investors, but it also makes them complementary—that is, they are also good tools for implementing high-level or principle-based frameworks like the ones you mention.

First, SASB standards are specifically designed for communicating with investors. Second, this focus on investors, and the fact that SASB standards include metrics, also makes SASB standards highly complementary to many other frameworks.

I always end these interviews with a book recommendation. What’s the last really good book you read?

One that pops into my mind is All the Light We Cannot See by Anthony Doerr. The book is about World War II and the resilience of a blind 12-year-old girl who flees Nazi-occupied Paris to the walled citadel of Saint-Malo. This girl crosses paths with a young German soldier in occupied France as both try to survive the devastation of World War II. The book is about resilience, which is a big part of my character. And it’s about compassion and seeing people as individuals and putting aside nationalism and ideologies to help each other in the most challenging times, which is what I believe the world needs today as we face so many challenges around the globe.

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