This document discusses the future of sustainability ratings and the Global Initiative for Sustainability Ratings (GISR) standard. It notes that while sustainability metrics have grown more voluminous, they remain fragmented and lack transparency. GISR aims to develop a standard that increases the credibility, quality and impact of sustainability ratings. The standard will focus ratings on material issues, balance transparency with commercial interests, and help integrate sustainability into financial decision making. GISR's goal is to redefine how companies create long-term value and move markets towards sustainability by 2020.

1. Redefining Value, Moving Markets: The Future of
Sustainability Ratings
The New Metrics of Sustainable Business 2013
Allen White, Global Initiative for Sustainability Ratings (GISR)

2. Harnessing Sustainability Ratings
to
Move Markets
September 2013

3. 3
“The great part of the
miseries of mankind are
brought upon them by false
estimates they have made of
the value of things.“
– Ben Franklin 1780

4. Peter Bakker
President, WBCSD; former CEO, TNT
4
“I am a capitalist…The mistake currently lies in
only expecting (and managing) a return on
financial capital. Capitalism requires a new
operating system and needs to be re-booted so
that we expect and manage the return on
financial, natural and social capital.
Business as usual is not an option for a future-
proofed economy in which nine billion people live
well with the limits of the planet by mid-century.”

5. 20 Years of Metrics
• More voluminous
– GISR data base: 1500+ indicators/500+ issues
– SASB: 900+ indicators; 500+ unique
– GRI: G4: 29 issues/149 “disclosures”; sector research:
2800 indicators
• More applications
– SRI
– Self Assessment
– Stock Exchanges
– Ratings: Sustainability and Credit
…………………. More material? More impactful?
5

6. Growing Evidence….
6
“ A good rule of thumb is that one negative story is the
equivalent of five positive stories. On the upside, a positive
ESG reputation adds an extra layer of protection—what we
call an ESG halo. Companies with an ESG halo were shielded
from a decline in stock price.”
“ESG disclosure is valuable because it helps a company
demonstrate that it is managing its risks and has a track
record of paying attention to its ESG performance. Those that
disclose more ESG information are more likely to enjoy a
lower cost of capital…”
- Deloitte Review, Issue 12, Dec. 2012, Dinah Koehler and Eric Hespenheide

7. Sustainability Information Value Chain
7

8. Standards Ecosystem
8
Identify
• GRI – Core universal and some sectoral indicator for sustainability reporting
• SASB – sector indicators for US SEC reporting
• IIRC – A framework that blends financial and sustainability information rooted
in “vital capitals:” Financial, human, intellectual, manufactured, natural, social
Inform
• GRI – Disclosure guidelines for stakeholders globally
• SASB – Disclosures of sector-specific indicators “material” to SEC
• IIRC – A framework for guiding companies on communicating how value is
created preserved
Evaluate
• GISR – Standard comprising principles, issues and indicators for measuring
corporate performance excellence

9. About GISR
 Founders: The Global Initiative for Sustainability Ratings (GISR) is a joint
project of Ceres and Tellus Institute — partners that founded the Global
Reporting Initiative (GRI)
 Vision: Redefining the definition and measurement of value companies
create in a way that aligns with the global sustainability agenda
 Mission: Create a world class corporate sustainability ratings standard as an
instrument for embedding sustainability into the financial markets
worldwide
 Strategy: Steward a multi-stakeholder and global process comprising:
investment managers, pension funds, companies, NGOs, accountancies,
academics, governments and raters
 Launch: June 2011
 Role: A standard setter. GISR will not rate companies; its standard will be
applied by existing and future ratings organizations
9

10. Selected GISR Partners
10
Companies Investors
Metanoia
Fund
NGOs & Foundations
Sponsors

11. What’s the problem?
 Corporate Sustainability (ESG) Ratings 2013
 Too many indicators
 Too many issues
 Too many surveys
 Too much volatility
 Too little transparency
>>>Curbs utility, uptake, integration, and impact
Opportunity—grow the supply, credibility
and quantity of quality ratings; mainstream
sustainability; move financial markets…
11

12. 12
Building the Standard:
Content and Accreditation Levels

13. Component 1: Principles
13
Process
 Assurability
 Continuous Improvement
 Impartiality
 Inclusiveness
 Transparency
Content
 Balance
 Comparability
 Comprehensiveness
 Sustainability Context
 Long-Term Horizon
 Materiality
 Value Chain
Exposure Draft>>>Beta>>>Version 1.0: November 2013

14. Example 1: A Balancing Act--
Transparency
14
 Companies: Essential for performance improvement
 Raters: IP is part of the business model
 Investors: Essential for informed choice and application
Thus, transparency of what, to whom and in what form?

15. Example 2: A Balancing Act –
Comprehensiveness and Sustainability
Context
15
X1
Baseline
year
Peer
comparison
Performance
Today
2
Company
Goal
3
STARTLINE
SUSTAINABILITYCONTEXT-FINISHLINE
4

16. State of Play – Credit Ratings
Number of Outstanding Credit Ratings by Category of Credit Rating
NRSRO Financial
Institutions
Insurance
Companies
Corporate
Issuers
Asset-Backed
Securities
Government
Securities
Total Ratings
AM Best N/R 4,826 1,910 56 N/R 6,792
DBRS 21,695 151 4,037 9,889 15,798 51,570
EJR 101 51 962 13 9 1,136
Fitch 54,586 4,010 14,427 58,315 217,198 348,536
JCR 163 27 478 N/R 54 722
KBRA 16,127 52 1,001 40 58 17,278
Moody’s 56,486 3,953 30,439 93,913 814,087 998,878
Morningstar N/R N/R N/R 16,070 N/R 16,070
S&P 60,700 7,800 45,400 108,400 948,300 1,170,600
Total 209,858 20,870 98,654 286,696 1,995,504 2,611,582
16 Source: NRSRO Annual Certifications, 2011

17. Sustainability: Embedded in Business Risk Profile
S&P’s Corporate Ratings Methodology: Business and Financial Risk Matrix
Financial Risk Profile
Business Risk
Profile
Minimal Modest Intermediate Significant Aggressive Highly
Leveraged
Excellent AAA/AA+ AA A A- BBB --
Strong AA A A- BBB BB BB-
Satisfactory A- BBB+ BBB BB+ BB- B+
Fair -- BBB- BB+ BB BB- B
Weak -- -- BB BB- B+ B-
Vulnerable -- -- -- B+ B B- or below
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18. Ratings 2020: Companies and Credit
18
Ratings
2013
STARTLINE
RATINGS2020FINISHLINE
Financial
Ratings
ESG
Ratings
Ratings
2020
Financial
Ratings
ESG
Ratings
Integrated
Ratings

19. Ratings 2020
19
RATINGS TODAY RATINGS 2020
Voluminous surveys burden
companies; underinvestment in
sustainability by investors.
Common survey for core
information and accompanying
supplements. Ratings harmonization
without over-prescriptiveness.
Lack of transparency impairs
application to performance
improvement and investor uptake
Users’ Guide to Sustainability
Ratings and GISR Principles enhance
transparency, utility and value of
ratings for financial markets
Lack of materiality leads to
information overload
GISR standard drives convergence
toward material issues and
indicators
Financial markets minimally
integrate sustainability information
GISR builds ratings credibility and
spurs market expansion for high
quality ratings

20. 20

21. An Invitation
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 Support GISR’s Standard Development Activities
 Technical Committee, Expert Advisor Committee, feedback
on public exposure and beta versions:
www.ratesustainability.org
 Join the Supporting Stakeholder Program
 A growing multi-stakeholder network of supporters
http://ratesustainability.org/get-involved/become-a-supporting-
stakeholder/
 Contact GISR to Explore Opportunities for
Collaboration : http://ratesustainability.org/contact-gisr/

22. Thank you
For more information:
www.ratesustainability.org
mark.tulay@ratesustainability.org
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