ESG Working Group - September 2023 update
Don Sharp from Citi shared the following update on the ESG Working Group at the June 2023 RIXML all-member meeting. The slides accompanying this update can be found here.

Over the summer, we have done quite a bit of research and analysis to determine how best to incorporate ESG tagging into RIXML v3.0.  While the SASB standard, which is designed to focus on the financial impact of ESG factors, is in many ways ideally suited to tagging for investment research, there are some considerations.

We have uncovered two concerns that might impact our decision to make the SASB taxonomy the required default ESG taxonomy for the next version of the RIXML standards:

One key consideration is licensing. As an organization, our preference is always to use open standards when possible, to ensure that third-party licensing requirements do not hamper firms’ efforts to adopt the RIXML standards. While SASB allows companies to freely use their taxonomy in creating their filings (10-Ks, 10-Qs, etc.), they do require licensing for firms intending to use their taxonomy for commercial purposes, including for investment research. Thus, RIXML will need to consider:

  • whether we as an organization would need to have a license to include the SASB taxonomy into our standards
  • whether research creators would need to have a license to include SASB tagging in the RIXML records they produce
  • whether content aggregators would need to have a license to ingest and/or process SASB tagging
  • whether content consumers would need to have a license to access the content 

We will be approaching IFRS/SASB to determine the licensing considerations we will need to factor into our decision regarding utilizing the SASB taxonomy as the default RIXML ESG taxonomy in v3.0.

If your firm has any input on using the SASB taxonomy in RIXML v3.0, please let us know.

Potential obsolescence 
Another key consideration is that SASB is now part of IFRS, which has indicated a long-term plan to fully incorporate the SASB taxonomy into its own. What isn’t clear at present is whether this will involve changes to the taxonomy and/or licensing requirements. Before deciding to use the SASB taxonomy, we will ensure that it will not become obsolete as IFRS updates their methodologies.

Purpose of tagging

As we work to identify the proper ESG taxonomy/ies to include in the next version of the RIXML standards, and the other ESG-related tags we will add, we have been careful to remember the purpose of RIXML tags:

the tagging for a research item is meant to describe the content of that specific research item, not to describe the company/industry/topic in general.

For ESG tagging, that means that a report would only have ESG tagging applied if that research report discusses some aspect of ESG sufficiently that an end user would expect to find it in search results. Buyside firms have indicated that it is also important to be able to search/filter for content that addresses ESG-specific issues they need to be aware of for regulatory reasons or to ensure that a fund’s investments meet ESG-related requirements.

We are trying to determine whether a smaller number of ESG-related tags – more than just Environmental, Social, and Governance, but fewer than the SASB Dimensions – would be sufficient.

We are also looking for input about whether adding tags to describe the nature of the impact of the ESG-related topic and/or the timeframe: would it be helpful to be able to indicate that a research item is describing a long-term financial ESG impact and a medium-term regulatory one? Would it be helpful to filter search results in this way?

Friday session ad

Our Friday Topic Series has concluded; however, we are in the process of making replays of the presentation portion of many of these meetings available.  These videos include the list of questions we would like your input on as we plan for RIXML v3.0, so feel free to watch them and let us know your thoughts - and feel free to share them with your colleagues as well!



Tagging of Non-Standard Research