A single question drives our indicator and metrics research: what should businesses measure in sustainability in order to address investor concerns?
Sustainability covers a vast range of subjects—climate change, water scarcity, poverty, socio-economic development, human rights and diversity, to name a few. Investors look to a bewildering array of questionnaires, analytics and research to assess the risks and opportunities presented by a company’s sustainability commitment, but the decision of what to report has largely been left to the companies themselves. More recently, there has been regulatory and other push toward expanded mandatory reporting in quarterly and annual financial disclosures. This raises the question: if a company will be forced to report on a select set of sustainability indicators to a “reasonable investor,” which indicators carry the greatest financial impact?
Very few efforts in this space are looking to scientific and statistically sound methods to demonstrate correlations between sustainability indicators and financial performance. With this program, the Center will begin with correlation testing of sustainability indicators against financial performance indicators followed by statistical hypothesis testing to see if we can definitively point to the most appropriate indicators.
Assuming the research team can successfully identify sustainability indicators correlated to financial performance, we will move to define a methodology to test causality and the most appropriate metric within those indicators.
Sustainability metrics is a work in progress, but solutions are beginning to emerge. As part of this program, Yale hosts a monthly seminar series welcoming practitioners who are working to overcome challenges and create systems to develop comparable metrics within and across sectors.