This Week’s Tech and Tools News: VRF Offers XBRL Taxonomy to Simplify ESG Disclosure

ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including Value Reporting Foundation, FTSE Russell, Intercontinental Exchange and Glass Lewis.

The Value Reporting Foundation (VRF) has released the SASB Standards XBRL Taxonomy, with the aim of simplifying integration into corporate reporting processes and improving the quality, usefulness and comparability of ESG disclosures to investors. VRF engaged PwC to support the initial development of a SASB XBRL Taxonomy to facilitate reporting in accordance with its 77 Industry Standards using structured data. It will work with software providers and issuers to provide examples of SASB Standards disclosures tagged with XBRL tags. “Because the SASB Standards XBRL Taxonomy is compatible with base taxonomies for financial reporting standards (like IFRS and US GAAP), businesses can leverage pre-existing processes and structures for use in tagging SASB disclosures,” said Madhu Mathew, VRF’s Director of Technology. “Similarly, many corporate reporting software providers and auditors already have technology for collecting and reporting data in XBRL format and can apply these processes to ESG data.” The VRF has also established a Taxonomy Review Committee to help govern the ongoing maintenance of the taxonomy, comprised of volunteer experts from public companies, software providers, data aggregators, audit professionals, regulators, and/or other interested parties. According to the VRF, more than 1280 firms disclose ESG data via SASB standards including half of the constituents of the S&P1200 Global index. The VRF was formally established in June following the merger of the International Integrated Reporting Council and the Sustainability Accounting Standards Board (SASB).

FTSE Russell, the index, data and analytics provider owned by the London Stock Exchange Group, has launched six Russell ESG indexes based on widely used US equity benchmarks the Russell 1000, Russell 2000 and Russell 3000. The six new indexes are constructed using “robust” ESG screening criteria and rely on a target exposure methodology to ensure they closely match risk and return characteristics of the underlying benchmarks. FTSE Russell’s target exposure approach provides a transparent mechanism for exercising “complete and precise control” over both investability and ESG objectives. The series contains two sub-groups: the Russell ESG Screened Target Exposure Indexes and the Russell ESG Enhanced Target Exposure Indexes. The ESG Screened versions are for investors who want to remove harmful products or controversial activities and still maintain broad US market exposure. The ESG Enhanced versions are designed for investors seeking ESG score enhancement alongside the risk and return characteristics of the underlying benchmark. These not only remove exposure to controversial business operations, but also incorporate sustainability issues by targeting specific ESG score improvement versus the benchmark “The Russell US ESG Indexes were developed for investors looking to incorporate sustainability considerations within a broad market portfolio without impacting the risk and return characteristics of the headline benchmark,” said Tony Campos, Head of Sustainable Investment, Americas, FTSE Russell.

Korea’s Samsung Asset Management has licensed the ICE EUA Carbon Futures Index for a new ETF, the KODEX Europe Carbon Allowance Futures ICE(H) ETF, according to data, technology and market infrastructure provider Intercontinental Exchange (ICE). The ICE EUA Carbon Futures Index measures the performance of a long-only basket of ICE EUA Futures Contracts. Each EUA contract is euro-denominated and represents a lot of 1,000 Carbon Emission Allowances deliverable under the EU Emissions Trading System. The Samsung ETF is Korea’s first carbon-based ETF and the first of its kind globally solely tracking the performance of EUA contracts. “We were drawn to ICE because it offers our customers access to one of the largest and most liquid environmental markets in the world” said Jaehun Jeong, Portfolio Manager at Samsung Asset Management. Another newly launched Korean ETF, the NH-Amundi HANARO Global Carbon Futures Index ETF, tracks the ICE Global Carbon Futures Index, measuring the performance of a long-only basket of ICE EUA Futures Contracts, ICE California Carbon Allowance Futures Contracts and ICE Regional Greenhouse Gas Initiative Futures Contracts. ICE’s Carbon Futures Indices Family capture the pricing of the three most actively traded carbon markets in the world, thereby helping users to navigate the long-term shift in the fuel mix to a net-zero-carbon economy.

Governance solutions provider Glass Lewis has agreed a strategic partnership to include security ratings, data and insights from cybersecurity specialist BitSight with its Proxy Paper research reports. Information on 20,000+ companies will be included to help investors better understand how cybersecurity issues may affect their investments. The arrangement will supply Glass Lewis clients with data-driven, evidence-based cybersecurity intelligence, improving their visibility into a dimension of company performance and governance, the firms said. “Investors are mostly in the dark when it comes to the cybersecurity of their investments,” said Steve Harvey, BitSight’s chief executive officer. “Providing Glass Lewis clients with BitSight ratings and data alongside its proxy research reports will deliver the insights necessary to have an enhanced understanding of the efficacy of a company’s oversight of cybersecurity risks and outcomes.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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