{"id":11067,"date":"2016-11-04T06:31:59","date_gmt":"2016-11-04T10:31:59","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/accounting-for-climate-change-new-frameworks-for-new-risks-and-opportunities\/"},"modified":"2016-11-04T08:40:47","modified_gmt":"2016-11-04T12:40:47","slug":"accounting-for-climate-change-new-frameworks-for-new-risks-and-opportunities","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/accounting-for-climate-change-new-frameworks-for-new-risks-and-opportunities\/","title":{"rendered":"Accounting for climate change: new frameworks for new risks and opportunities"},"content":{"rendered":"

<\/u>Climate change is happening and will impact nearly all business activity, but companies and investors lack access to an entire class of information that would help them make decisions about business strategy and resource allocation. [1]<\/a><\/em><\/strong> The Sustainability Accounting Standards Board (SASB) has led the charge on designing a complement to FASB aimed at providing transparent, comparable information about sustainability and its impact on business.[2]<\/a> Now, SASB is pivoting from standard development to implementation and scale.<\/p>\n

A CHANGING (BUSINESS) CLIMATE:<\/strong><\/p>\n

There is increasing consensus that climate change is happening and impacting human and natural systems.[3]<\/a> There is also consensus that its impact on business will be enormous. In a 2010 survey, 83% of companies reported that climate change impacts pose a risk to their business and 86% reported that it poses a business opportunity.[4]<\/a> Though many impacts are longer-run, the economy is already feeling impacts, and these will grow in the next 5-25 years, particularly impacting infrastructure, energy, and agriculture and varying by industry and region.[5]<\/a><\/p>\n

Climate change is likely to impact 93% of the U.S. capital markets.[6]<\/a> Companies may face threat to supply, physical damage, rising prices for inputs, regulatory threats, and many other potential impacts.[7]<\/a> Due to its ubiquity, climate change presents a trend that can\u2019t be diversified away by even savvy investors; instead they must focus on managing it.[8]<\/a><\/p>\n

\u00a0<\/strong>THE NEED FOR CAPITAL MARKET ADAPTATION<\/strong><\/p>\n

Despite consensus that fundamental performance of businesses will be impacted by climate change, reporting tools to measure performance and share information about risk have not adapted. Companies lack tools to measure and report on sustainability, and investors lack comparable information about companies to effectively allocate capital to the best long-range investments given climate change\u2019s threats.<\/p>\n

SASB was conceived in 2010 with this critical gap in mind[9]<\/a> and launched as a 501c3 in 2011. SASB articulates its case that:<\/p>\n

\u201cIf investors are to effectively evaluate climate risk, they need a far better understanding of granular, industry-specific climate impacts, with industry-specific standards by which to evaluate corporate performance on these issues.\u201d[10]<\/a><\/em><\/strong><\/p>\n

 <\/p><\/blockquote>\n

\u00a0<\/strong>THE ORIGINS OF SASB: FROM CONCEPT TO STANDARD DEVELOPMENT<\/strong><\/p>\n

SASB has spent the last 5 years in R&D mode\u2014developing its standards and positioning itself as a thought leader in a niche industry of sustainability investing. To develop standards, it has engaged stakeholder working groups, accessed data from Bloomberg technologies, and incorporated a public comment period and expert perspectives from law, investing, and accounting.[11]<\/a><\/p>\n

It has aimed to create standards that provide clear, transparent guidance about what sustainability considerations are material to company performance and how to report them. Provisional standards have been released in batches\u2014starting with the Health Care industry in 2013 and concluding with 79 industries released by last month.[12]<\/a><\/p>\n

SASB\u2019S NEXT FRONTIER: THE CASE FOR A PIVOT IN OPERATING MODEL<\/strong><\/p>\n

SASB faces a critical pivot point. As focus on economic impacts of climate change increases, SASB\u2019s tools are positioned for implementation and adoption at scale. SASB has begun to move from R&D toward proof of concept and roll-out.[13]<\/a><\/p>\n

The pivot entails two big components:<\/p>\n