Rise of the Shadow ESG Regulators: Investment Advisers, Sustainability Accounting, and Their Effects on Corporate Social Responsibility
Actions that fall under the catchall of “corporate social responsibility” have been viewed with skepticism. In the United States, part of the blame lies with lax laws and regulations surrounding social and environmental disclosure. Disclosure may soon be vastly improved with finalization of the Sustainability Accounting Standards Board’s (SASB's) financially material social and environmental reporting standards. While the standards are voluntary, the fact that they have been endorsed as “material” by many of the world’s largest investment advisers will transform them into legally actionable standards. This Article describes the current situation in which corporations have a deepening financial interest in fighting against authoritarianism and climate change, highlights a significant root of the problem as to why most companies still have far to go in strengthening their corporate social responsibility standards, discusses potential solutions to this problem, describes SASB's mandate, and explores the implications of this new regulatory role that large asset managers have unwittingly assumed.