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AN INTEGRATED BOTTOM LINE: Jean Rogers, founder of the Sustainability Standards Accounting Board - YouTube
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- So welcome back everyone.
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I'm here with Jean Rogers,
the founder of SASB,
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the Sustainability
Accounting Standards Board,
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who's here speaking with
my class this morning,
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and I wanted to take this
opportunity to pick your brain
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and hear your vision about how one enters
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this really complex dynamic
field of sustainability
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with so many stakeholders,
and changes the system.
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So first let's start by
defining what is SASB,
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what do you do, what do you offer?
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- Great, well first of all,
thank you for having me.
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The Sustainability
Accounting Standards Board
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is one of my favorite topics,
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so I'm looking forward to
getting the word out about that.
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What SASB does is develop standards
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for social and environmental impacts
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for companies to describe
their performance to investors.
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And SASB standards are done by industry,
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and so we cover
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79 industries and a broad range
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of social and environmental issues
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from human rights to child
labor and the supply chain
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to greenhouse gas emissions
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and water use.
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All those topics are fair
game in the standards,
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but I think what SASB does really well
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is look at when it's likely
to be material to an investor
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and then describe within
the industry vertical
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which issues are really most
relevant and actionable.
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- So the key assumption
here is that investors
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want to know about sustainability
and that it affects
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a company's financial
performance or future.
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- That's right.
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The key concept for SASB
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is the materiality of
these sustainability issues
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and by that I mean the
financial importance.
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How is it going to affect
the future positioning,
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the outlook, the revenue,
and market share,
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or even the operational
expenses or cost of capital?
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Any of those things can be affected
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by either really good performance
on sustainability issues
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or on the down side by
really poor performance
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by not managing these issues very well.
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And so from an investor point of view
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they want to understand, what's likely
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to affect financial performance?
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What kind of issues within each industry
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could have an impact on future
or even current performance?
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- So many times when a social entrepreneur
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is tackling a challenge like this,
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their first reflex is to
create a product or service
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that they can sell, and they really think
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about starting this venture
and taking it to market.
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That's usually the conversation we have
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when we're talking about entrepreneurship,
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and it sounds from based
on my understanding
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that your journey was
a little bit different
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in terms of thinking about
what is the ecosystem
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and how I can influence that.
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So can you talk a little bit more
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about your entrepreneurship journey,
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because it sounds like
you were thinking outside,
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building your own venture.
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- That's right, I didn't come
at it from the perspective
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of thinking about it really
even as a new venture.
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I'm a really big fan of
prototypes and analogs.
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My background is actually in engineering
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so I'm naturally a systems thinker,
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but one of the things that
was so influential for me
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was watching
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another nonprofit
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transform an industry,
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and that is the U.S.
Green Building Council.
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That is the field that I
actually kind of grew up in
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and saw the transformation that happened
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by articulating what mattered
in terms of a green building,
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how to define it, how to measure it,
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and also how to educate all
of the different players
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in the green building
industry from architects
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to contractors to owners to engineers
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to get them all on the same page
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with the same type of information,
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and it really did transform
the building industry.
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You wouldn't do a new building now
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without getting your LEED platinum
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plaque on the wall.
- Very true.
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- And the founder of that, David Gottfried
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is a friend of mine
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out in California
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and I watched him develop
that and the effect
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that that had on
performance, on the industry
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and really on the norms
that were established,
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and I just thought to myself,
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we need that for every industry.
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We need that for 79 other industries,
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and so he always kind of laughs when I say
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he made it look easy (laughs)
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so we just--
- Changing societal norms.
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well you know, it was done
once, it was a prototype
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so I just said well
that's the way you do it.
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You begin with this model
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and start to articulate what matters
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and then educate.
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The other thing then when I got started,
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because I had that model in my mind
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of the U.S. Green Building
Council and how to apply it,
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and I was watching how they
really navigated the system,
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I then looked at the system,
the financial information flows
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and in the system of the capital markets
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which is a very mature
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and rigorous system
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of regulators and investors and companies,
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thinking about systems
change, there's a lot
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of different ways that
you can intervene, right?
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You can change the power structure.
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You can change the rules of the game,
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or you can change the information flows.
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We were David to the Goliath
of the capital markets.
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There was no way we were going
to change the power structure
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as a small nonprofit in
the U.S. capital markets.
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There's also, you could change the rules.
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Some people do set out to
change regulations, redefine
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what is material.
- There's so many
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different levers you could pull.
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- But we purposefully said
we could spend a few years
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lobbying to change regulation
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or we could get to work and
change the information flows
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by developing standards.
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So that's the lever
that we decided to pull.
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We thought it would be
faster, more effective
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and that once we started
this new information flowing
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around these sustainability issues,
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getting it into the hands of investors,
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no one would have to make them care.
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If they understood the link
to financial materiality,
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the money would follow.
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And capital always wants to be put
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to its highest and best
use, so we were working
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with the way the system wants to work
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but getting better information out there.
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So that's the lever we decided to pull.
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It turns out there's
another really great analog
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in the capital markets, which
is the Financial Accounting
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Standards Board, and so we
learned a great deal from them.
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No need to reinvent, we
looked at what it means
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to be a rigorous standards setter,
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how to structure the organization,
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learned best practices
in standards setting,
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and they really taught us a lot
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from the way that they do things
for financial information.
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So those two analogs
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for SASB were very very important
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in paving the way and helping us choose
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which levers to pull to
get the biggest impact.
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- So, did it work?
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Do you feel like getting
this information to investors
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has changed the way they invest,
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and what's next for those
social entrepreneurs
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thinking I want to jump in
and shape this system too?
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- I think there is great
timing for when SASB
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is sort of coming to fruition
over the past eight years now,
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and investor interest in this information
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and there's this just
incredible convergence now
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of what I would call
values-oriented investors
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and value-oriented investors,
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the traditional economic
actors in the market.
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And still there's about four
out of every five dollars
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are those traditional single
bottom line investors,
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and then one out of every five dollars
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is now invested with
a sustainability lens.
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People want to do more with their money,
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they want to understand that information.
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But those traditional investors
are also now recognizing
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the materiality of these
issues, that they really do
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and can affect financial performance,
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so they want the information
just from a risk perspective.
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They don't really particularly care
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about the underlying issues.
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That's okay, they still want the data.
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They still want the information.
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So there's this convergence happening
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which is very serendipitous which means
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both of those types of investors
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need that same kind of data,
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that same kind of information
to inform their decisions,
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slightly different motivations,
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but the same type of information,
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and ultimately capital also flowing
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to more sustainable enterprises
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because the risk is reduced
and also the possibility
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for innovation and
growth is there as well.
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I think we, SASB kind of rode
this, you know, perfect wave
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of investor interest,
increased understanding
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of the materiality of these issues,
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and unfortunately no shortage
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of global sustainability
challenges that need
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to be addressed and that are
becoming increasingly urgent.
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So it's created this perfect storm
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where SASB was really working
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to catch up with investor demand
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for this type of information
and get these standards done
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and out to the market as quickly
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and as rigorously as we could.
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So actually the standards
are just about to be released
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in their final form in a couple of weeks
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after eight years and
close to 80 industries.
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It was definitely
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a labor of love.
- Congratulations
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- But I think we'll
now really begin to see
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an acceleration of investment
decisions being made
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in consideration of these
sustainability factors.
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- So it sounds like by
leveraging the materiality
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and improving information
flow, we can really get
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beyond this concept of triple bottom line
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where social, environmental, and financial
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are seen as different target
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and more into an integrated bottom line.
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- That's exactly right.
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Nobody has to make investors care
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about material information.
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If they do understand those things,
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they're going to consider
it in exactly the same way
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that they consider any
factor whether they're
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selecting a security,
evaluating a company,
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or building a diversified portfolio.
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They want to understand
their exposure to risk,
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and these are factors
that contribute to risk,
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and also to return.
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So as long as you serve
it up that information
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in the way that people
are used to consuming it,
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for investors that means getting it
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on their Bloomberg Terminal,
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getting it the way they
consume financial data.
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They didn't want to have to go
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and read 1000 sustainability reports
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to try to extract this information.
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They want to be able to type in a ticker
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and get it in the same format
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that they get other information.
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Simply serving it up in a way
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that they were comfortable with
has made all the difference,
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and will now really easily
inform investment decisions.
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- Thank you so much Jean
for all your work at SASB
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and for being with us
here today at Yale SOM.
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- Absolutely, thank you,
it's a pleasure to be here.
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