by Shane Henson — June 15, 2011—Ceres and Tellus Institute, two organizations that work with companies, investors and nonprofit groups to embed sustainable practices in capital markets, recently announced the launch of an initiative to create and bring to widespread adoption a single standard for rating the sustainability performance of companies.
Founding partners of the new coalition, the Global Initiative for Sustainability Ratings, include leading investors and businesses like TIAA-CREF, the Calvert Group and Bloomberg. According to officials within Ceres and Tellus Institute, every day, ratings play a pivotal role in determining access to capital—and its cost—for everything from public company stocks to all types of bonds. But, officials note, the proliferation of scores of sustainability ratings providers has spawned inconsistent and often opaque approaches. Additional problems include conflicts of interest among raters and rated companies, and widespread “survey fatigue” among companies responding to information requests by multiple raters. These conditions have led some companies to “cherry pick” results that are most favorable while sidestepping less favorable ratings.
“We need a new powerful instrument to steer capital—financial, human, social and natural—toward sustainability leaders and away from the laggards,” said Ceres President Mindy Lubber, in announcing the GISR. “With global sustainability crises from climate change to water shortages, resource pressures and population growth more evident every day, it’s time to build a ratings system that distinguishes between those companies that clearly see and act upon sustainability opportunities and risks and those that don’t.”
Lubber says GISR will achieve its mission over the coming year in two phases, each convening a broad group of stakeholders. The first will systematically evaluate the quality of existing ratings programs from both a process and content standpoint. Then the group will design a best-practice ratings framework as a benchmark for use by raters and ratings users. The two activities will be conducted through an independent and non-commercial process.
As the newly developed ratings framework enters the market, a GISR board of directors will evolve with the expectation that GISR will gradually morph into a stand-alone, nonprofit, global organization. This framework is modeled on the Global Reporting Initiative (GRI) pioneered by Ceres and Tellus. Now a stand-alone organization based in Amsterdam, the GRI has become an internationally recognized and widely adopted standard for corporations wishing to disclose their sustainability risks and practices as part of their normal public disclosures.
