June 3, 2021

ESG Disclosures: TCFD Overtakes SASB As Investors’ Preferred Framework?

About a year ago, everyone was jumping on the SASB bandwagon and predicting it would become investors’ preferred disclosure framework. According to Morrow’s recent Institutional Investor Survey, though, sentiment has shifted. Here are some takeaways from 49 participants that collectively have $29 trillion in assets under management:

– 75% prefer the TCFD reporting framework

– 53% prefer SASB (down from 77% a year ago)

– 39% prefer proprietary in-house frameworks focused on material topics (up from 9% last year)

The TCFD framework encourages companies to use existing disclosure processes to report on climate-related risks and opportunities – focusing on governance, strategy, risk management, and metrics & targets. SASB is very industry-based and has been adopted by many companies as a way to map through and disclose financially material ESG information.

These two frameworks are also complementary in some ways – both are incorporated in the World Economic Forum’s “Stakeholder Capitalism Metrics” – which is part of the effort that was announced last fall to promote a single comprehensive reporting system. With standard-setters collaborating, companies becoming more mature in their own reporting, investors evolving the type of info they want, and an SEC proposal potentially on the horizon, it will be interesting to see where this all stands in another year.

Liz Dunshee