Company Executives Calling for Rules Regarding ESG From FASB

The Financial Accounting Standards Board is being called upon by executives from numerous public companies to create accounting rules for environmental, social, and governance (ESG) issues, reports The Wall Street Journal.

Back in June, the FASB opened up consultations for their agenda to public opinion on what their long-term goals should be; it was the first time it has done so in five years. The board is expected to release its summary in the coming months based on the results from input, which was closed as of last month.

Telecommunications company Charter Communications has asked that the FASB regulate accounting for energy transactions such as carbon-offset credits and renewable energy certificates, all geared towards helping a company reduce its carbon footprint. In their letters, companies have reiterated the lack of rules and highlighted their expectations that this type of reporting will only continue to become a bigger part of their business accounting going forward.

In particular, Charter is seeking to become carbon-neutral and wants to partake in more energy-related agreements, but as there are currently no rules regarding how to account for those transactions, the task is proving difficult.

“Uncertainty exists today on what…accounting literature to apply,” Kevin Howard, Charter Communications’ chief accounting officer and controller, wrote in a letter on September 22.

This is a sentiment that was repeated by Autodesk’s chief accounting officer, Stephen Hope, who wrote in his own letter about his company’s struggle to provide financial reports for investors about Autodesk’s renewable energy credits and carbon offsets that could be compared to competitors. A lack of regulation and rules means that the reports from companies are often different, containing different types of measurements or reporting different metrics, making it impossible for investors to compare.

There is movement within the ESG reporting space as SEC Chairman Gary Gensler has requested that his staff submit a proposal by the end of the year regarding mandatory ESG disclosures for companies.

SPDR Invests in Sustainability

As companies increasingly look to change their sustainability practices, the ESG metrics and reporting for those businesses becomes increasingly more relevant. For investors that are looking for to gain exposure to companies through an ESG lens, State Street Global Investors offers several options.

One such option is the SPDR S&P 500 ESG ETF (EFIV), which takes a holistic approach to ESG by not only focusing on the environmental aspect of ESG, but on sustainability across the social and governance practices of the companies it invests in as well.

The fund tracks the S&P 500 ESG Index, which selects from top companies that meet ESG criteria within the S&P 500, while also adhering to the sector weights of the S&P 500 Index.

EFIV utilizes SPDJI ESG scores to rank companies based on their sustainability. This score is derived from analyzing a thousand data points covering a variety of topics collected from companies and then asking roughly 120 questions, according to the S&P Global website.

EFIV excludes companies involved in tobacco and controversial weapons, those that derive 5% or greater of their revenues from thermal coal extraction or generate power from coal, or that score low on the United Nations Global Compact standards.

The ETF’s top three sector allocations include 30.28% in information technology, 14.18% in consumer discretionary, and 12.45% in healthcare, as well as several other smaller allocations.

EFIV has an expense ratio of 0.10%, making it one of the cheapest ESG ETFs on the market.

For more news, information, and strategy, visit the ESG Channel.