2019 ESG Reporting Guide

ESG
Reporting
Guide 2.0
A Support Resource for Companies
May 2019
ESG REPORTING GUIDE 2.0
Foreword
We are constantly drawn to the promise of technological
progress and how it can transform our lives. The companies
on our markets are leaders in innovation, whether they are
creating the next consumer technology, developing the latest
medical therapy, or providing sources of energy. With these
advances, investors and other external stakeholders rely on
new types of analytics and information to understand the
positive change companies are making in the communities
they serve.
Expanded choice and opportunity in the new ‘markets

economy’ requires more data to drive decision-making.
Environmental, social, and governance (ESG) data points
have become useful tools—not only for investors seeking
performance indicators, but also for public companies
trying to increase operational efficiency, decrease resource
dependency, and attract a new generation of empowered
workers. This ESG Reporting Guide is intended to serve as a
resource for all of these ends.
We are currently at the forefront of building the

infrastructure to support a new future, focusing on safety,
transparency and fairness. Nasdaq is helping to create a
world where all market participants are able to share in
economic opportunities, and this guide is a vital part of
that work.
Stock exchanges – at the intersection of investors, companies Expanded choice and control in the new
and regulators – have a critically important role in the global
markets economy requires more data to drive
transition to more sustainable economies. We therefore
commit ourselves to strengthening our cooperation with our decision-making, and ESG data points have
clients around the world for a more successful tomorrow. become vital tools.
Sincerely,
Nelson Griggs
President
Nasdaq Stock Exchange
[email protected] 1
Table of Contents
Foreword................................................................................................. 1
Introduction............................................................................................ 3
Using This Guide................................................................................... 4
What Is ESG?.......................................................................................... 4
Reporting ESG........................................................................................ 5
Stakeholders........................................................................................... 6
Materiality.............................................................................................. 8
Management........................................................................................... 8
Markets.................................................................................................... 8
Stock Exchanges.................................................................................10
Standards..............................................................................................11
Sustainable Development Goals...................................................12
ESG Metrics...........................................................................................13
a. Environmental........................................................................... 14
b. Social............................................................................................. 19
c. Governance................................................................................. 24
Explanation of Revisions................................................................ 29
Appendix 1: Local Rules & Regulations..................................... 33
Appendix 2: Research Sources...................................................... 34
2 [email protected]
Introduction
Nasdaq has had a formal Corporate Sustainability program • Internal documentation and management of ESG
in place for six years. Through that program, we engage with performance data
listed companies, investors, standards-setters, regulators, and • Inclusion of material ESG indicators in enterprise risk
other stock exchanges on the market impact of sustainability management (ERM) systems
issues—specifically Environmental, Social, and Corporate • Peer and competitor benchmarking and analysis
Governance data, otherwise known as ESG.
• Undertaking a materiality assessment; publishing the results
Effective management of sustainability issues helps Nasdaq of that assessment
(and our listed companies) better understand operational • Greater engagement with current and prospective employees
performance, address resource inefficiencies, and forecast on sustainability issues
enterprise risk. In addition, there is a growing body of
• Productive meetings with investors and analysts
academic and analytic evidence suggesting that ESG excellence
correlates with other benefits, such as lower costs of • Integration of ESG metrics into management performance
capital, reduced shareholder turnover, and enhanced talent (and remuneration) indicators
recruitment and retention. With a renewed market emphasis • Formal inclusion of ESG data in board practice and oversight
on long-term value creation, we also believe that ESG is an
• Inclusion in indexes and other lists related to ESG
effective and mutually beneficial communication channel
outperformance
between public companies and the investment community.
• Disclosure of ESG data in stand-alone sustainability reports
To broaden understanding of these dynamics—and to solicit
feedback from our stakeholders—Nasdaq hosts regular • Disclosure of ESG data to established sustainability reporting
webinars, in-person events, and small-scale workshops. We frameworks
have also discussed our findings in a previous ESG Reporting • Disclosure of ESG data in financial filing and investor
Guide, Sustainability Report, and other publications. documents
We are ourselves longstanding reporters to several • Creation of products and services that address sustainability
sustainability frameworks, including the Global Reporting concerns (such as the SDGs)
Initiative (GRI) and the United Nations Global Compact (UNGC).
Companies that compete and survive in a resource-constrained
For the last three years, Nasdaq has been honored as one
world will become the new baseline, and market forces will
of the world’s most sustainable companies in the Dow Jones
reward some and punish others. Nasdaq must itself navigate
Sustainability Index (DJSI).
this transition (to new energy sourcing, better human capital
Our brand and our advocacy on this topic allow us to management, more inclusive economics, and so on) and assist
collaborate with virtually all of the global sustainability our listed companies in doing likewise. That is why we pursue
efforts, among them the Sustainability Accounting Standards this work, and why we offer this guide as a resource.
Board (SASB) and the recent Task Force on Non-Financial
Climate Disclosures (TCFD). Through these connections and Evan Harvey
others, Nasdaq is able to stay apprised of developments in the Global Head of Sustainability, Nasdaq
space, represent the viewpoints of ourselves and our listed
companies, and help to drive smart, practical ways forward.
Because ESG is an emerging field, thus far exempt from the Nasdaq is home to more than 4,000 public
discipline (and faith) that we apply to traditional financial
companies on various markets, and it would
reporting, listed company reactions to this work are likely to be
varied. Nasdaq is home to more than 4,000 public companies be foolish to assume that they all share the
on various markets, and it would be foolish to assume that they same perspective on any single issue.
all share the same perspective on any single issue. That is why
the materiality process (described in more detail below) is an
essential part of this work, a way to customize ESG to best
fit company purpose. But this guide may also provoke other
reactions, including some or all of the following:
[email protected] 3
Using This Guide This guide was created primarily for companies, but investors,
exchanges, regulators, and other capital market stakeholders
Nasdaq launched its first ESG data reporting guide in March have contributed much to it. As a primer on the current
2017 as an experiment, both in business intent and regional practice and enduring value of ESG management and data
focus. It was designed to promote meaningful engagement reporting, we hope this guide brings clarity and synthesis to a
between listed companies and investors, a dialogue based on crowded marketplace, not additional confusion. It is certainly
the emergence of ESG data as a significant performance signal. not a new sustainability reporting framework, nor should
Could the exchange, in tandem with key multi-stakeholder it provide any substitute or shortcut when evaluating the
working groups, provide a compelling business case for potential value (or risk) associated with investing.
the voluntary reporting of so-called “non-financial” data? The Nasdaq ESG Reporting Guide is also, by design, a living
Based on the participation and feedback from a number of document. The version you have before you is significantly
pilot reporting companies, and its reception in the global revised, and we expect to do so on a regular basis as new
marketplace, the answer seems to be yes. issues emerge, existing standards shift, and calculation
The first version of this guide was specifically addressed to methodologies improve. If you have any comments, critiques,
our Nordic and Baltic companies—operating in markets where or suggestions for the improvement of this document, please
investor expectations are clearer and regulatory actions more email us ([email protected]).
present, at least when it comes to ESG. But this is certainly
a global issue, and the utility of this guide is not limited to a
handful of markets or a few dozen outperforming companies.
Firms of all sizes, in virtually all sectors, are wrestling with the
both the reporting burdens and bottom-line opportunities that
ESG can provide.
This new version of the ESG Reporting Guide is intended to

meet several goals:
• Eliminate and revise uncommon or impractical metrics
• Incorporate new developments in the marketplace (such as

TCFD, SDGs, GRI Standards, EU NFR Directive, and others)
• Simplify and standardize guidance, labels, and calculations
• Improve ESG engagement for small- and medium-sized What Is ESG?

business enterprises
ESG generally means a broad set of environmental, social
• Cover all Nasdaq markets – including the U.S. equities market
and corporate governance considerations that may impact a
– in a single document
company’s ability to execute its business strategy and create
This document considers the long-term value of strategic and value over the long term. While ESG factors are at times called
transparent ESG practices, specifically as a vital connection non-financial, how a company manages them undoubtedly has
point between individual companies and prospective investors. measurably financial consequences.
In this work we have focused on economic principles and
Over the course of this project, we managed to create a short
specific data, rather than moral or ethical arguments, because
list of the most pervasive and persuasive ESG metrics—the
bottom-line impacts are more immediate and actionable. This
Key Performance Indicators (KPIs) that we believe provide
guide also suggests that a focus on ESG can lead to more
the greatest insight into the sustainability performance of the
efficient, harmonious, and sustainable management practices.
greatest number of companies. Our evaluation of these metrics
Nasdaq encourages its listed companies to consider this was based on five key factors: precedent, prevalence, potential,
information as they evaluate costs and benefits, to use the perspective, and practicality.
guide only as a reference point in determining the best way
Through our trade association the World Federation of
forward for that business. We do not require, by rule or by
Exchanges, or WFE, exchanges have worked together for
practice, the disclosure of ESG data. If companies view ESG as
many years to create a short list of the most pervasive
a way to improve operations, enhance strategy, broaden risk
and persuasive ESG metrics. These are the KPIs that we
oversight, or engage with new investors, then this guide may
believe provide the greatest insight into the sustainability
prove useful.
performance of the greatest number of companies.
4 [email protected]
But the dynamics surrounding ESG are still in motion. We have disclose its ESG data, it should be able to articulate the value
seen a transition from vague, philosophical, and aspirational proposition for all relevant stakeholders. To that end, we have
language (“sustainability”) to more specific, operational, and provided a summary of certain value drivers below. Taken
tactical terms (“ESG”). ESG means Environmental, Social, together, they demonstrate a few of the potentially positive
and Corporate Governance information, but it also means impacts of better reporting.
something else; not text but data, focusing on performance
Our thinking in this area has been driven by a foundational
that is measurable, manageable, actionable, and reportable.
document, The Model Guidance on Reporting ESG Information
• Microsoft ((Nasdaq: MSFT) doesn’t just publish the text to Investors, originally published in 2015 by the UN
of their vendor responsibility code, but lists its top 100 Sustainable Stock Exchanges Initiative. The assertions therein
suppliers by spend annually about the inherent value of ESG reporting have proven
more prescient with time, and still form the foundation
• Cisco (Nasdaq: CSCO) doesn’t simply publish photographs
of any meaningful “business case” for the practice. There
of the many food drives that it organizes, but also the total
are supporting studies for virtually all of the points below,
amount of food (by weight) donated
located in the Appendix.
Does ESG include anything and everything that’s not
traditionally reported? In the U.S., that means SEC filings such Access to Capital
as the 10Q & 10K, annual reports, and proxy statements. Some
argue this is the case, and therefore prefer the “non-financial” • Demonstrate transparency and effective management and
data label. This is an interesting word choice, given that the enhance the company’s ability to attract long-term capital
data drives investor dollars today and measurable financial and favorable financing conditions.
consequences tomorrow. • Enhance the company’s ability to attract long-term investors,
There are also a number of emerging issues that may belong including major institutional investors such as pension funds
in the traditional reporting channels. The Sustainability (in fact, some funds actually have mandatory requirements in
Accounting Standards Board (SASB) advocates the inclusion this regard).
of certain sector-based ESG disclosures that are financially
material. The TCFD recommends much more robust Profitability and Growth
environmental reporting in financial filings. And institutional • Generate financial value for the company by identifying
investors—perhaps most notably BlackRock, via CEO Larry opportunities for cost savings, revenue generation, and risk
Fink’s letter on corporate governance—advocate for KPIs that mitigation.
provide real insight into long-term value creation.
• Drive continuous improvement by creating accountability
and fostering collaboration with stakeholders.
“ESG is no longer purely ethical, but rather a • Create a deeper understanding of stakeholder needs, which
could drive innovation and enhance market differentiation
financially-motivated search for enlightened
and competitiveness.
management, best practices, and long-term returns.”
• Enable management and board scrutiny of ESG opportunities
—Thomson Reuters, Jan 2018 and risks, and promote company-wide alignment on goals.
Compliance and Risk Management

Reporting ESG
• Address mandatory reporting requirements on financially
Because ESG reports tend to be part of the “total mix” of material factors and mitigate compliance risks related to
information that potential investors evaluate, Nasdaq does not financial reporting regulations.
require the participation of its listed companies in this process.
The rewards for managing and reporting ESG are made clear • Establish measurement and reporting processes for ESG
elsewhere in this document, but should not imply a benefit from information.
Nasdaq itself for doing so, nor an implied punishment for not • Help the company stay ahead of emerging ESG and reporting
doing so. This is a completely voluntary initiative. regulations.
Nasdaq may, however, track the participation of listed • Secure the company’s license to operate by demonstrating
companies in this program in order to better support their corporate transparency and responsiveness to stakeholder
efforts. If and when a public company does choose to needs.
[email protected] 5
Corporate Reputation and Branding Because any substantive ESG practice requires a hard look at
these parties, it’s vital to define terms.
• Demonstrate corporate commitments to responsibly
managing environmental, social, and economic impacts. According to the Corporate Finance Institute (CFI), the
“shareholder is a stakeholder of the company while a
• Exhibit corporate adherence to industry ethical standards
stakeholder is not necessarily a shareholder. A shareholder is a
and national and international frameworks on corporate
person who owns an equity stock in the company and therefore
sustainability and sustainable development, particularly in
holds an ownership stake in the company. On the other
light of the UN Sustainable Development Goals.
hand, a stakeholder is an interested party in the company’s
• Enhance corporate reputation by improving stakeholders’ performance for reasons other than capital appreciation.”
perception of a company through reporting-related
There are two spheres of influence to consider – those who
stakeholder engagement.
directly benefit (or suffer) economically based on the performance
• Improve employee perception of the company, helping to of the company, and those who benefit (or suffer) in any other
attract, retain, motivate, and align new and existing employees. ways based on the performance of the company. Profitability
is of extreme interest to the shareholder; responsibility may
Information Measurement & Flow be more directly tied to the stakeholder’s interests.
• Ensure that key stakeholders have the relevant information Because Nasdaq itself is a hybrid organization—publicly traded
that is needed to make informed decisions about the company, exchange operator, self-regulated organization,
company’s ability to create value in the short, medium and financial product creator, data steward—defining our circle
longer term. of stakeholders is difficult. During our own materiality
assessment, it was revealed that all of the institutions and
• Measure the realization of strategy and the extent of ESG impacts.
entities below (and others) bear upon our business in some
• Reporting ESG enables the measurement of success or meaningful way:
progress in key corporate strategies as well as impacts of
• Listed Companies
corporate practices.
• Listed Company Investors
Enhanced Stakeholder Relationships • Nasdaq (NDAQ) Investors
• Improve relationships with key stakeholders by engaging • Investor Advocacy Groups
them throughout the reporting process.
• Exchange Regulators
• Other Stock Exchanges

Stakeholders • Market Analysts and Researchers
When determining the parties that directly influence (or are • Public Policymakers
directly influenced by) company operation, we often use • NGOs and Reporting Frameworks
two parallel and yet wholly distinct terms: “stakeholder” and
• Pre-IPO Companies
“shareholder.” It is factually and thematically incorrect to use
these terms interchangeably in the business environment. • Our Customers and Suppliers
• Our Current (and Future) Employees
• Public Communities
Stakeholders must be taken into account. They may be

integrated into a risk assessment, an examination of new
market opportunities, or a cost-benefit analysis in talent
acquisition, but their interests do intersect with those of the
company. How much they intersect, and how meaningfully, is
the stuff of a materiality assessment.
The list below offers a brief glimpse into the diversity, impact,
and evolution of many stakeholder types. Companies are
advised to consider some or all of these stakeholders as they
come to terms with their ESG reporting practices.
6 [email protected]
• Investors. ESG specialist firms like PAX, Parnassus, Aviva,

and Boston Common Asset Management have been focused
on ESG performance for more than a generation—and even
bigger firms are following suit. State Street, Blackrock, and
Vanguard have all unveiled new and more aggressive ESG
strategies since 2018.
• Indexers & Innovators. This category includes well-known ESG

indexers, such as MSCI and RobecoSAM, but many product
innovators that have found entirely new ways leverage
new data. The green bond and climate bond revolution, for
example, would not have caught fire without the underlying
data—and we have the Climate Bond Initiative actively setting
best practices. Datamaran, an AI-driven “non-financial risk
management” tool, uses sophisticated analytics to search and • Suppliers & Supply Chains. Small suppliers tend to be part of
benchmark ESG data signals, among other things. large corporate supply chains, and those large corporations
are increasingly being asked to expand the scope of their
• Exchanges. Stock exchanges first started getting into the
ESG oversight and control. Competition for contracts now
ESG reporting space decades ago, in South Africa and Brazil
commonly requires an ESG performance disclosure, especially
most prominently. But what was once exceptional has
when doing business with government agencies. Consider the
now become commonplace. Thanks to the work of the UN
rise of the supply chain consultancies and standards-setters,
Sustainable Stock Exchanges (SSE) and the WFE Sustainability
such as EcoVadis, Enablon and the Sustainable Purchasing
Working Group (SWG), almost half of the stock exchanges
Leadership Council (SPLC). These firms tend to evaluate
on the planet have provided (or have committed to provide)
the sustainable pedigree of suppliers, so that corporate
ESG reporting guidance to their issuers. Nasdaq Helsinki
purchasers can be sure they engage with ESG-compliant
was recently rated the most sustainable stock exchange in
vendors. Various industry associations have been focused
the world by Corporate Knights; more than half of its large
on ESG—most notably, the Responsible Business Alliance
listings disclose significant environmental metrics.
(formerly the Electronics Industry Citizenship Coalition),
• Governments. The regulatory push for complete and which has been driving supply chain responsibility for
comprehensive ESG data is truly worldwide. In most cases, member companies (Apple, IBM, Samsung, Sony) since 2004.
government regulators are seeking better reporting from
• Human Capital. There are significant performance pressures
public companies. The Nonfinancial Reporting Directive
coming from within organizations as well. The concept of
in Europe (2014/95/EU) does just this, requiring certain
human capital management (HCM), the cultivation of collective
companies to file an ESG-focused declaration with their
economic value for an employee population, is inevitably tied
annual reports. Local country governance codes have been
to ESG concerns, as workers increasingly gravitate towards
commonplace in the Nordics, but now we are seeing them
socially responsible and transparent companies (see studies
tied to emerging markets in Asia, South America, and sub-
by Nielsen, 2015, and Horizon Media, 2017). The prospect of
Saharan Africa.
recruiting and retaining top talent, especially in a tight market,
• Non-Governmental Organizations (NGOs). First, there are seems to inevitably touch upon ESG metrics.
many United Nations projects and agencies with a direct
• Academics & Analytics. In addition to the environmental
tie to sustainable development: the UN Environment
and social pressures that drive individual companies
Programme, UN Women, the Economic and Social
to consider ESG, there is a body of academic research
Council (ECOSOC), and the 2030 Agenda for Sustainable
(Eccles and Serafeim, Harvard; Todd Cort, Yale) that points
Development (the impetus for the Sustainable Development
to macroeconomic benefits as well. Recent metastudies
Goals, or SDGs), to name just a few. But other, more highly
have been able to convincingly integrate a great deal of
specialized groups have become influential. Shift, for
underlying academic research in order to make a grand case—
example, translates UN principles into actionable plans
“ESG and Financial Performance: Aggregated Evidence from
for business, creating partnerships between economic
More than 2000 Empirical Studies” (2015) and “From the
stakeholders to report on—and hopefully remediate—human
Stockholder to the Stakeholder: How Sustainability Can Drive
rights issues. And in the environmental space, the Natural
Financial Outperformance” (2015). A number of firms (ISS,
Resources Defense Council (NRDC) and the World Wildlife
PIMCO, JP Morgan, among many others) now fund a team of
Fund (WWF) come quickly to mind.
analysts devoted exclusively to ESG research.
[email protected] 7
• Media. Popular media outlets (Newsweek, Forbes, Fortune) known or potential effect on value creation with reference to
have been driving ESG awareness for years, and companies magnitude of the matter’s effect and, likelihood of occurrence.
frequently make changes to their ESG strategy and reporting
• For purposes of reporting, the Global Reporting Initiative
in order to qualify for “best of” lists. The benefit of inclusion
(GRI) suggests the report should cover aspects that reflect the
goes beyond brand value and good PR. FTSE Russell analyzed
organization’s significant economic, environmental and social
the Fortune 100 Best Companies and made a startling
impacts; or substantively influence the assessments and
discovery: selected companies outperform the market, beating
decisions of stakeholders.
other relevant benchmarks by nearly 5% (“The Best Companies
to Work for Are Beating the Market,” Fortune, 2/28/18). • SASB’s approach to financial materiality is based on a
traditional definition that is well-accepted globally, that
• Rankers, Raters, and Reporters. Twenty years ago, there
is, information that is reasonably likely to be important to
were only a few firms that focused on developing ESG
investors in making voting and investment decisions. SASB
reporting standards—such as the Carbon Disclosure Project
identifies industry-specific sustainability factors that are
(now CDP) and the Global Reporting Initiative (GRI), which
reasonably likely to impact the financial condition or operating
still stands tallest in the field. But now there are technical
performance of companies in an industry and therefore warrant
reporting structures (COSO, ISO), financial disclosure
standardized disclosure to investors. While SASB’s standards
protocols (SASB), and framework aggregators (CDSB) that
are a useful tool to guide disclosure of financially material
integrate ESG considerations.
topics, it is the responsibility of company management to
—adapted from “What’s Driving ESG? A Top-Ten List” by Evan determine the factors that are material to the business.
Harvey (Capital Finance, April 2018)
• Datamaran, a firm that specializes in analyzing non-financial
risk management, has recently published an overview of
the variant interpretations of materiality and its impact on
Materiality public disclosure. "Materiality Definition: The Ultimate Guide"
While the concepts of “materiality” and “material business is freely available on their website and provides a useful
impact” are essential to a proper evaluation of ESG cause and primer on the topic to date.
effect, it is not the intention of this document to define the Last but not least, we would draw your attention to vital work done
process whereby materiality is evaluated. That work must be by the Corporate Reporting Dialogue. Their Statement of Common
undertaken by the corporate reporters—possibly in concert Principles of Materiality of the Corporate Reporting Dialogue
with more detailed guidance from third parties—and with (2016) not only summarizes the variant definitions of materiality
the interests of their stakeholders at heart. Nasdaq assists used by the organizations above (and others), it also posits a
companies in the evaluation of materiality through direct harmonized “common core” amongst and between the variations.
intervention, passive education, expert consultation, case
studies and original research.
When evaluating materiality, companies are encouraged to "Nasdaq believes that principles-based
consider impacts to external stakeholders and ecosystems in disclosure grounded in materiality allows
addition to those directly affecting the company. This process (and
reporting companies the degree of flexibility
the subsequent reporting of it) allows investors to better assess
the systemic and longer-term risks that inevitably arise through needed to provide investors with the proper
these impacts. Direct reporting of ESG performance data provides amount and mix of information.”
just one part—however vital and necessary— of the overall
company picture; understanding external impacts illuminates a —Ed Knight, Nasdaq EVP & General Counsel, Comment Letter to
company’s overall value proposition and long-term risk profile. SEC (16 Sep 2016)
For a better understanding of the concept of materiality, we

refer you to the sources and definitions below. Bear in mind Management
that assessing materiality is a continuous process, producing
a highly individualized result. Companies are encouraged to Data reporting is but one of the parts inherent in good EG
focus on the needs of their own business, rather than adhering management. How a company gathers the data, disseminates
blindly to a standard definition. it internally, structures a team to better understand it, and
incents others to improve performance are equally important
• The International Integrated Reporting Council (IIRC) suggests
parts. There is a new management discipline associated with
an issue is material if it is relevant (is likely to have an impact
the increased understanding and valuation of ESG, one that
on value creation) and is sufficiently important in terms of its
brings to bear these factors below:
8 [email protected]
• Data-driven decision-making Some experts and analysts argue that an increased focus
on longer-term measurements (such as ESG) could remedy
• Distributed (shared) responsibility for difficult or ambitious
dysfunctional market dynamics. They believe that short-term
projects
investment distorts real valuation, leads to short-term thinking
• A willingness to break with the status quo and thus artificially inhibits growth and innovation. Could ESG
The “right” management approach to ESG is still somewhat facilitate a transition from stock trading to share ownership,
undetermined, but there is a process taking root. An influential from selling short to holding long?
Thomson Reuters blogpost (2018) argued for a four-step There are a number of new trends in the global capital markets
procedure: that are driven by—and drivers of—greater ESG integration into
1. Align ESG with the core strategy, products/services, and the value chain, including:
operations of the company • Expansion of fiduciary responsibility beyond delivering
2. Assign resources to address material ESG issues to assist investor returns
with the task above • Frustration with counterproductive or contentious
3. Manage and measure ESG performance according to well- investor engagements
defined KPIs. • Lack of long-term strategic discussion during analyst and
4. Engage investors, customers, and employees in the effort earnings calls
• Passive investment strategies that seem to limit ESG

—Using ESG as a Driver of Performance, 13 Sep 2018
intervention
• Adoption of ESG data signals as shared value creation tools

This process may be complicated by the sheer scope of the
• Global focus on the idea of sustainable capital formation
work. Many different organizational verticals—often with
their own budget, resources, and goals—may be called upon. • The high costs of investor turnover
Some of these likely include internal operations, legal, finance, • Mainstream expectations of more robust governance insight
compliance, HR functions, health and safety, product managers,
Finally, we would draw your attention to a recent statement
investor relations, corporate secretary, executives and the
(2019) on ESG by the International Organization of Securities
board of directors. Even if the company has a functional
Commissions (IOSCO). This membership organization, made
and efficient ESG team in place, integrating the competing
up of securities regulators from all parts of the globe, sets
perspectives and interest levels of such a disparate group of
certain standards for proper and efficient market operations.
participants often proves difficult. For this reason and others,
The statement reads, in part: “ESG matters, though sometimes
the enterprise must be single-minded and vocal (at least
characterized as non-financial, may have a material short-
internally) about the importance of ESG to its business.
term and long-term impact on the business operations of the
issuers as well as on risks and returns for investors and their
investment and voting decisions.”
“From a management perspective, integration of
ESG dimensions of performance makes a company
more resilient in an increasingly more complex, "Our goal is to take an increasing role in
interconnected and dynamic business environment.” facilitating ESG practices, disclosures, and
—Susanne Stormer, VP Corporate Sustainability, NovoNordisk dialogue between investors and public
companies. This not only creates liquidity for
Markets new investible products, such as ESG index
futures, green bonds, and exchange-traded
Market reaction to—and engagement with, and valuation
of—ESG has been evolving for more than two decades. This products that focus on ESG principles—but it
is due to many complex and evolving factors, including the will also likely create a better, more sustainable
emergence of very large multinational organizations, an
abundance of performance data, and the essentially shared
economy over the long-term."
nature of global issues such as climate risk, diversity and —Adena Friedman, Nasdaq CEO, LinkedIn Post, 20 Jan 2019]
inclusion, and access to economic opportunity.
[email protected] 9
Stock Exchanges
From the perspective of Nasdaq as a listings venue, we always
start with the primary underlying purpose of listing standards
and rules around trading stocks on exchanges, which are
to protect investors (the lifeblood of any exchange) and to
maintain the integrity of the market. This all goes to being
sure that companies have the confidence to list and investors
have the confidence to trade.
To maintain this confidence and trust, we have various

financial and governance requirements for listed companies
and we monitor those on an ongoing real-time basis. Many
of these requirements are based on financial and other
information as reported in mandatory financial disclosures,
proxies and other public filings by listed companies.
Governments and regulators around the world have started

to adopt “non-financial” disclosure requirements for public
The Dodd-Frank [U.S.] regulation, for example, required us
companies. Even the SEC has moved towards more non-
to adopt disclosure standards around a company’s executive
financial disclosure requirements, including conflict minerals
compensation and clawback policies.
and compensation-related disclosures.
Nasdaq has a listing requirement that specifies prompt
The Range of Exchange Intervention on ESG
public disclosure of material news. That’s any information
that would reasonably be expected to affect the value of its
Low Medium High
securities or influence investor decisions. Thus far, that has
(35 exchanges) (40 exchanges) (12 exchanges)
been limited to significant transactions, such as acquisitions,
new products, senior management changes, defaults and
• No action • Create stakeholder • ESG-related
other developments related to securities, and important legal
& company listing rules
• Promote ESG or regulatory developments.
dialogue*
“best practices”* • ESG-tiered
• Create indexes, listing fees
To date, Nasdaq has not taken any regulatory action over
• Participate in financial products failure to make full disclosure of sustainability-related
exchange/investor (green bonds)* • Delisting for ESG matters. But we have acted when companies fail to disclose
dialogues* noncompliance material news in a timely manner (a court order that closed a
• Create voluntary company’s principal production facility; overstating the value
• Join working ESG guidance* • Publication of ESG
of acquisitions; misstating the status of negotiations related to
groups* reporting data
acquisition; and so on).
• Tiered disclosure
• Publicly support recommendations • Audit enforcement
As listing venues, we must always serve the needs of our
ESG frameworks*
• Requiring more companies. Overregulation may curtail entrepreneurialism; make
• Report or explain
• Offer awards sophisticated companies less willing or able to capitalize on opportunities. The
reporting constant churn of filings, disclosures, statements, applications,
standards (IIRC) and surveys tends to steal focus from long-term goals, and a
fear of expensive litigation paralyzes growth.
*Nasdaq actions to date
At the same time, a lack of regulatory control may embolden
Some non-financial listing requirements are already in place, impropriety and corrupt the better angels of corporate nature.
mostly governance related. For instance, listed companies If the exchange can help businesses better plan and execute
must have an annual meeting and a majority independent long-term strategy, markets will naturally disseminate and
board and comply with committee composition requirements. incentivize the right tools.
10 [email protected]
Exchanges & ESG
Why are stock exchanges involved in ESG?

The scale of exchange influence
• WFE: 45,000 listed public companies, >$80T in market cap (basically = global GDP)
• Small, iterative changes in reporting practices create profound macroeconomic impacts
Quest for greater insight into corporate performance signals
• The “returns-at-any-cost” mindset creates more risk than reward
• Capital, when deployed efficiency, can generate market return and social impact
• Exchanges are incented to create longer-term listings, longer-term market value
Exchange intervention on ESG has been impactful:

UN SSE progress, 2015-2019
• 77/80 exchanges have now committed “to support sustainable and transparent markets”
• 38/80 exchanges have issued ESG guidance to their companies
• Nine (9) more exchanges may do so this year (2019)
Standards
The sheer number of investor advocacy groups, analysts,
experts, academics, and non-governmental organizations (NGOs)
in the space can be daunting. Companies often ask: Which one is
the most reputable? Which one gets the attention of investors?
Do we have to report the same data in several different places?
Do we have to fill out the entire questionnaire?
For a company just beginning their sustainability journey,

I would focus on the five organizations listed below. They
have the longest experience in the space, the most direct and
substantive engagement with stakeholders, or the kind of
reputation and reach that makes them unavoidable.
• The Global Reporting Initiative (GRI) offers perhaps the

broadest and most deeply researched sustainability sustainability metrics. SASB’s focus is on enabling companies
reporting framework in the world. Launched in Boston in to more effectively communicate with investors about the
1997, the GRI is now headquartered in Amsterdam, which subset of sustainability information that is financially material
gives some indication of its global reach and history of to the business, standardizing this disclosure in a way that is
engagement with investors. The current version of its consistent, comparable, and reliable.
framework, G4, came out two years ago.
• The International Integrated Reporting Council (IIRC) has
• The Sustainability Accounting Standards Board (SASB) was created a framework that seeks to integrate sustainability
born out of responsible investment research at Harvard performance metrics and “traditional” financial metrics in a
University, and is an independent 501(c)3 non-profit. SASB single corporate disclosure. The Integrated Report specifies
relies on technical research and extensive market input to a unified corporate narrative without segregation of “non-
develop and disseminate a streamlined set of industry-specific financial” metrics like ESG.
[email protected] 11
• The Climate Disclosure Project (CDP) focuses almost

exclusively on climate reporting, energy strategy, and
Sustainable Development Goals
climate change. The UN Sustainable Development Goals (SDGs) are an
• The United Nations Global Compact (UNGC) asks companies ambitious set of 17 goals (and 169 underlying targets)
to publicly endorse and operationally integrate a designed to alleviate many pervasive social, economic, and
10-point policy, covering human rights, labor standards, environmental problems by the year 2030 – especially those
environmental actions, and anti-corruption. that may form an existential threat to this planet and our
ability to live peacefully upon it. The SDGs are meant to attract
the awareness and support of companies in alleviating issues
that are closely related to business (Gender Equality, Decent
Work Conditions) and those that may not seem so closely
related (Life Below Water, Zero Hunger).
The SDG project follows in the wake of the Millennium

Development Goals (MDGs) from 2000-2015, which sought
similar ends but focused more on government intervention
than business participation. The goals themselves are non-
binding, and there are few definitive guidelines for company
management and/or reporting of efforts that contribute to the
success of the SDGs.
Despite that limitation, Nasdaq supports the work of the

SDGs. Our advocacy and support is mainly channeled through
membership in (and leadership of) the UN Global Compact,
More and more groups are getting involved in the corporate a business membership organization that helps to broaden
sustainability conversation, stimulating a debate that impacts awareness of UN issues within economic circles. We have also
individual investors and global markets. Regulators in integrated the work of the SDGs into the sustainability tools
Europe and Asia have issued requirements for more detailed and support that we provide to listed companies, leveraging
sustainability reporting from public companies. One recent events, white papers, and webinars to demonstrate the value
EU rule, for example, requires large companies to include and impact of the SDGs.
environmental, governance, and diversity disclosures in its
As of this writing (2019), a relatively small number of Nasdaq-
annual report (NFR Directive, 2014). France just issued guidance
listed companies are publicly reporting progress against
for sustainability reporting by investors, meaning: institutions
the SDG goals (notable exceptions include Intel, Microsoft,
and fund managers would be required to disclose any
Symantec, and Starbucks), but we expect that number to go up.
investment holdings in fossil fuels or other carbon-based assets.
The UN and stock exchange leaders previously identified
Stock exchanges are increasingly involved as well. There
the SDGs that most pertain to our industry and the various
are mandatory listing requirements related to sustainability
ways that capital markets can help meet related goals. Per
already in place in Brazil, South Africa, India, and Singapore,
this guidance, the SDGs that receive special emphasis from
and more seem to be on the way in emerging Asian markets.
Nasdaq include:
Large exchanges are cooperating in working groups to create
smart and practical sustainability disclosure guidance for listed • Gender Equality (SDG 5). Ensuring women’s full and effective
companies. Nasdaq leads the two most prominent efforts: participation and equal opportunities for leadership at all
the sustainability working group at the World Federation of levels of decision-making in political, economic, and public life.
Exchanges and the Sustainable Stock Exchanges Initiative at • Responsible Consumption and Production (SDG 12).
the United Nations. Encouraging companies, especially large and trans-national
Investor advocacy groups are also heavily involved. The UN- companies, to adopt sustainable practices and to integrate
backed Principles for Responsible Investment, for example, sustainability information into their reporting cycle.
is an advocacy group that has grown to include 1,400 • Climate Action (SDG 13). Improving education, awareness
signatories representing more than $59T AUM. PRI signatories raising and human and institutional capacity on climate
are committed to engaging with their investment targets to change mitigation, adaptation, impact reduction, and
improve a wide range of ESG issues. early warning.
• Partnerships for the Goals (SDG 17). Enhancing the global

partnership for sustainable development complemented The ESG data set is growing more robust,
by multi-stakeholder partnerships that mobilize and share
definitive, and mainstream every day,
knowledge, expertise, technologies and financial resources to
support the achievement of sustainable development goals in and we are finding better ways to
all countries, particularly developing countries. measure performance.
ESG Metrics
There are many reasons for this revision of the first ESG narrowed the list of 33 ESG metrics in the previous version
Reporting Guide, published in 2017, but the most important to just 30 in this one, not because some of the metrics were
has to do with the evolving nature of the data itself. Not superfluous, but rather to focus more effort on (and drive
only is the ESG data set growing more robust, definitive, and more market valuation to) the most meaningful, practical, and
“mainstream” every day, but we are finding better ways to achievable ones.
measure performance through the trial and error process. Also,
The list below, divided into Social, Environmental, and
as more companies wrestle with the process, we are fixing
Corporate Governance subsections, is meant to give our public
some of the practical and legitimate boundaries of reporting.
companies some clarity and direction when considering ESG
In some ways, the ESG data universe is still expanding at reporting. In each instance, we provide not just the ESG metric,
an astounding rate. New topics are still emerging, and the but a number of related insights:
connections between company operation and downstream
• Why is it measured?
impact are being made clear. The big data era in investing has,
• How is it measured?
finally, made ESG data itself more investment-grade. Since the
• Why is it disclosed?
previous version of this guide, we have seen new KPIs focus
• How is it disclosed?
on human rights, anti-slavery, data privacy, tax and payments
to governments, water stewardship, and so on – all under the In addition, we have included information that may assist
collective label of ESG. in your evaluation of the relative merits of each data point:
existing connections to prominent ESG reporting frameworks,
But the data universe is also contracting, too. Divergent
the relative percentage of Nasdaq-listed companies reporting
metrics have been streamlined, as have divergent ESG
this data (when known), and links to underlying calculation
reporting frameworks. The markets created convenient
methodologies. If the metric has experienced a distinct or
and insightful shortcuts (such as CEO Pay Ratio) in order to
lengthy historical evolution, we have also tried to cite primary
understand complex organizational dynamics. Nasdaq even
sources for your further research.
Environmental (E) Social (S) Corporate Governance (G)
E1. GHG Emissions S1. CEO Pay Ratio G1. Board Diversity
E2. Emissions Intensity S2. Gender Pay Ratio G2. Board Independence
E3. Energy Usage S3. Employee Turnover G3. Incentivized Pay
E4. Energy Intensity S4. Gender Diversity G4. Collective Bargaining
E5. Energy Mix S5. Temporary Worker Ratio G5. Supplier Code of Conduct
E6. Water Usage S6. Non-Discrimination G6. Ethics & Anti-Corruption
E7. Environmental Operations S7. Injury Rate G7. Data Privacy
E8. Climate Oversight / Board S8. Global Health & Safety G8. ESG Reporting
E9. Climate Oversight / Management S9. Child & Forced Labor G9. Disclosure Practices
E10. Climate Risk Mitigation S10. Human Rights G10. External Assurance
Environmental Data
Companies may elect to report any or all of the Environmental metrics below, per stakeholder guidance, industry or
sector standards, or materiality assessment implications. Please use a "respond or explain" rationale when following this
recommendation. If a certain response is omitted, use the comment area to explain the reasons why (i.e., “immaterial”).
All responses are intended to be reported annually, unless otherwise indicated, and the time scope should be noted.
E1. GhG Emissions

E1.1 Total amount, in CO2 equivalents, for Scope 1 (if applicable)
Why is it measured? Greenhouse Gas (GhG) emissions are significant determinants of climate change and global environmental health
How is it measured? By tracking the actual or estimated atmospheric emissions produced as a direct (or indirect) result of the
company's consumption of energy
Why is it disclosed? Understanding every company’s emissions profile is an essential precursor to meaningful and shared climate
intervention
How is it disclosed? As a number, trended over time (and compared against historical and industry averages, if possible)
Connections to • GRI: 305-1, 305-2, 305-3

Frameworks • UNGC: Principle 7
• SASB: General Issue / GHG Emissions (See also: SASB Industry Standards)
• TCFD: Metrics & Targets (Disclosure B)
Percentage of 80% (report at least one metric)

Companies Reporting?
Notes & Sources Please defer to the WRI/WBCSD GhG protocol; companies may elect to disclose performance targets for E1
E2. Emissions Intensity

E2.1 Total GhG emissions per output scaling factor
E2.2 Total non-GhG emissions per output scaling factor
Why is it measured? Contextualizes an organization’s resource efficiency relative to economic value generation
How is it measured? By dividing annual emissions (numerator) by various measures of economic output (denominator)
Why is it disclosed? Serves as a competitive benchmark, risk management indicator, and economic efficiency KPI
Connections to • GRI: 305-4

Frameworks • SDG: 13
• UNGC: Principle 7, Principle 8
• SASB: General Issue / GHG Emissions, Energy Management (See also: SASB Industry Standards)

Notes & Sources Scaling factors set by reporting company; examples include: revenues, sales, production units
E3. Energy Usage

E3.1 Total amount of energy directly consumed
E3.2 Total amount of energy indirectly consumed
Why is it measured? Energy cost, source, availability, and resilience directly impact a company's ability to operate
How is it measured? Typically measured in megawatt-hours (MWh) or gigajoules (GJ)
Connections to • GRI: 302-1, 302-2

• SASB: General Issue / Energy Management (See also: SASB Industry Standards)

Notes & Sources Direct energy is produced & consumed on company-owned or -operated property; Indirect energy is
produced elsewhere (i.e., utilities); companies may elect to disclose performance targets for E3
E4. Energy Intensity

Total direct energy usage per output scaling factor
Why is it measured? Contextualizes an organization’s resource consumption relative to physical footprint
How is it measured? By dividing annual consumption (numerator) by various measures of physical scale (denominator)

Percentage of N/A
Notes & Sources Scaling factors set by reporting company; examples include: physical floor space, employee headcount
E5. Energy Mix

Percentage: Energy usage by generation type
Why is it measured? Energy cost, source, availability, and resilience directly impact the company's ability to operate
How is it measured? By quantifying the specific energy sources most directly used by the company
Why is it disclosed? The replacement of nonrenewable sources with renewables signals a company’s responsible consumption &
longterm strategic focus

Percentage of 7%
Notes & Sources “Generation type” set by reporting company; examples include: renewables, hydro, coal, oil, natural gas
E6. Water Usage

E6.1) Total amount of water consumed
E6.2) Total amount of water reclaimed
Why is it measured? Water cost, source, availability, and resilience directly impact the company's ability to operate
How is it measured? Water consumed, recycled, and reclaimed annually, in cubic meters (m3)
Why is it disclosed? Illuminates risks posed by disruptions to water supplies or cost increases as clean, fresh water becomes
increasingly scarce

• SASB: General Issue / Water & Wastewater Management (See also: SASB Industry Standards)

Notes & Sources Companies may elect to disclose performance targets for E6
See also: Investor Water Toolkit (Ceres, 2018); The CEO Water Mandate (UN Global Compact)
E7. Environmental Operations

E7.1) Does your company follow a formal Environmental Policy? Yes, No
E7.2) Does your company follow specific waste, water, energy, and/or recycling polices? Yes/No
E7.3) Does your company use a recognized energy management system? Yes/No
Why is it measured? Emerging standards of environmental responsibility demand policy formation and formal execution
How is it measured? Companies that create, publish, and periodically update a policy document that covers this subject may
affirmatively respond
Why is it disclosed? Comparing expectations against performance is an indicator of the company’s ability to execute operational
tactics
How is it disclosed? As text, with appropriate links to public content
Connections to • GRI: 103-2 (See also: GRI 301-308 for relevant topic-specific standards)
Frameworks • SASB: General Issue / Waste & Hazardous Materials Management; Water and Wastewater Management
(See also: SASB Industry Standards)

Notes & Sources Examples related to E7.3 might include ISO 50001, for example
E8. Climate Oversight / Board

Does your Board of Directors oversee and/or manage climate-related risks? Yes/No
Why is it measured? Increased awareness and understanding of climate-related risks and opportunities within the company
resulting in better risk management and more informed strategic planning [TCFD]
How is it measured? Companies that cover climate risk in board meetings (as part of the official agenda) or have a board
committee dedicated to climate-related issues may affirmatively respond
Why is it disclosed? Stakeholders use this metric to evaluate the efficacy and scope of enterprise risk management (ERM)
Connections to • GRI: 102-19, 102-20, 102-29, 102-30, 102-31

Frameworks • SASB: General Issue / Business Model Resilience, Systemic Risk Management (See also: SASB Industry
Standards)
• TCFD: Governance (Disclosure A)
Percentage of N/A
Notes & Sources See also: ESG, Strategy, and the Long View: A Framework for Board Oversight (KPMG, 2017)
E9. Climate Oversight / Management

Does your Senior Management Team oversee and/or manage climate-related risks? Yes/No
Why is it measured? Increased awareness and understanding of climate-related risks and opportunities within the company resulting
in better risk management and more informed strategic planning [TCFD]
How is it measured? Companies that cover climate risk in senior management meetings (as part of the official agenda) or have a
management committee dedicated to climate-related issues may affirmatively respond
Connections to • GRI: 102-19, 102-20, 102-29, 102-30, 102-31

Frameworks • SASB: General Issue / Business Model Resilience, Systemic Risk Management (See also: SASB Industry
Standards)
• TCFD: Governance (Disclosure B)
Percentage of N/A
Notes & Sources See also: Climate-Related Disclosures and TCFD Recommendations (Harvard Law School Forum, 2018)

Total amount invested, annually, in climate-related infrastructure, resilience, and product development.
Why is it measured? Climate-related investment (on the risk or opportunity side) demonstrates an understanding of how the physical
and transition risks and opportunities of climate change might plausibly impact the business over time [TCFD]
How is it measured? Companies measure the total dollar amount (USD) invested in climate-related issues, including R&D spend
Why is it disclosed? Easier or better access to capital by increasing investors’ and lenders’ confidence that the company’s climate-
related risks are appropriately assessed and managed [TCFD]
Connections to • UNGC: Principle 9

Frameworks • SASB: General Issue / Physical Impacts of Climate Change, Business Model Resilience (See also: SASB
Industry Standards)
• TCFD: Strategy (Disclosure A)
Percentage of N/A
Notes & Sources See also: Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-Related Risks &
Opportunities (TCFD, 2017)
Social Data
Companies may elect to report any or all of the Social metrics below, per stakeholder guidance, industry or sector standards, or
materiality assessment implications. Please use a "respond or explain" rationale when following this recommendation. If a certain
response is omitted, use the comment area to explain the reasons why (i.e., “immaterial”). All responses are intended to be
reported annually, unless otherwise indicated, and the time scope should be noted.
S1. CEO Pay Ratio

S1.1) Ratio: CEO total compensation to median FTE total compensation
S1.2) Does your company report this metric in regulatory filings? Yes/No
Why is it measured? It illuminates the company’s costs (and, by implication, its valuation) for the Chief Executive role as compared
against other employees.
How is it measured? As a ratio: the CEO Salary & Bonus (X) to Median FTE Salary, usually expressed as “X:1”
Why is it disclosed? Some stakeholders (primarily investors) assert that this metric allows them to evaluate the potential impacts
of executive compensation; a significant gap in pay between the CEO and the rest of a company’s employees
might lower productivity and increase turnover, with inevitable ties to profit and return
How is it disclosed? As a number, trended over time (and compared against historical and industry averages, if possible) (S1.1); As
text, with appropriate links to public content (S1.2)

Percentage of UNGC: Principle 6

Notes & Sources Use total compensation, including all bonus payments and incentives; defer to Dodd-Frank regulatory
guidance (US)
S2. Gender Pay Ratio

Ratio: Median male compensation to median female compensation
Why is it measured? This measures the remunerative scope and impact of any “gender gaps” within the company
How is it measured? As a ratio: the median total compensation for men compared to the median total compensation for women
Why is it disclosed? Many countries have introduced legislation to enforce the principle of equal pay for work of equal value.
This issue is supported by the ILO Convention. Equality of remuneration is a factor in retaining qualified
employees in the workforce. Where imbalances exist, an organization runs a risk to its reputation and legal
challenges on the basis of discrimination. [GRI]

• SASB: General Issue / Employee Engagement, Diversity & Inclusion (See also: SASB Industry Standards)
Percentage of N/A
Notes & Sources Reported for FTEs only; Use total compensation, including all bonus payments and incentives.
S3. Employee Turnover

S3.1) Percentage: Year-over-year change for full-time employees
S3.2) Percentage: Year-over-year change for part-time employees
S3.3) Percentage: Year-over-year change for contractors and/or consultants
Why is it measured? The relative percentage of employees who leave the organization may directly impact resource allocation,
budgets, planning, and productivity
How is it measured? Percentage of total annual turnover, broken down by various employment types
Why is it disclosed? A high rate of employee turnover can indicate levels of uncertainty and dissatisfaction among employees,
or may signal a fundamental change in the structure of the organization’s core operations. Turnover has
direct cost and value implications either in terms of reduced payroll or greater expenses for recruitment of
workers. [GRI]
Connections to • GRI: 401-1b

• SASB: General Issue / Labor Practices (See also: SASB Industry Standards)

Notes & Sources Turnover includes all job changes, whether due to dismissal, retirement, job transition, or death
S4. Gender Diversity

S4.1) Percentage: Total enterprise headcount held by men and women
S4.2) Percentage: Entry- and mid-level positions held by men and women
S4.3) Percentage: Senior- and executive-level positions held by men and women
Why is it measured? Increasing the diversity of thought (as embodied in men and women) may lead to enhanced creativity, greater
team productivity, and the alleviation of systemic inequities.
How is it measured? Percentage of male-to-female metrics, broken down by various organizational levels
Why is it disclosed? This information can signify the organization’s efforts to implement inclusive recruitment practices and
the optimal use of available labor and talent. An uneven pattern of promotion and seniority by gender can
indicate risks related to workplace inequity. Some investors specifically target more diverse (or gender-
balanced) companies. [GRI]


Notes & Sources See also: Declaration on Fundamental Principles and Rights at Work (ILO, 1998)
S5. Temporary Worker Ratio

S5.1) Percentage: Total enterprise headcount held by part-time employees
S5.2) Percentage: Total enterprise headcount held by contractors and/or consultants
Why is it measured? This ratio provides valuable insight into human capital strategy and management regarding certain
employment structures
How is it measured? Percentage of Full-Time (or FTE-equivalent) positions held by non-traditional workers in the value chain
Why is it disclosed? Breaking down the workforce by employment type demonstrates how the organization structures its human
resources to implement its overall strategy. It also provides insight into the organization’s business model,
and offers an indication of job stability and the level of benefits the organization offers. [GRI]

Percentage of N/A
Notes & Sources See also: Guidelines for Multinational Enterprises [OECD, 2011]
S6. Non-Discrimination
Does your company follow a sexual harassment and/or non-discrimination policy? Yes/No
Why is it measured? This ratio provides valuable insight into human capital strategy and management regarding certain protected
employment classes
Connections to • GRI: 103-2 (See also: GRI 406: Non-Discrimination 2016)

Percentage of 84%
Notes & Sources See also: Guidelines for Multinational Enterprises [OECD, 2011]
S7. Injury Rate

Percentage: Frequency of injury events relative to total workforce time
Why is it measured? Low injury and absentee rates are generally linked to positive trends in staff morale and productivity. [GRI]
How is it measured? Total number of injuries and fatalities, relative to the total workforce
Why is it disclosed? Health and safety performance is a key measurement of organizational responsibility, and negative
performance may impact investment, valuation, and the company's continuing social license to operate.

• SASB: General Issue / Employee Health & Safety (See also: SASB Industry Standards)
Percentage of 2%
Notes & Sources Reference ILO & UNDHR standards, if possible.

See also: Corporate Disclosure of Human Capital Metrics (Harvard Law School, 2017)
S8. Global Health & Safety

Does your company follow an occupational health and/or global health & safety policy? Yes/No
Why is it measured? Formal policies may promote the acceptance of responsibilities by multiple parties and the development of a
positive health and safety culture. This Indicator reveals the extent to which the workforce is actively aware of
policies that determine health and safety management principles. [GRI]
Connections to • GRI: 103-2 (See also: GRI 403: Occupational Heath & Safety 2018)
• SASB: General Issue / Employee Health & Safety (See also: SASB Industry Standards)
Percentage of 84%
Notes & Sources See also: Guidelines on Occupational Safety and Health Management Systems (ILO, 2001)
S9. Child & Forced Labor

S9.1) Does your company follow a child and/or forced labor policy? Yes/No
S9.2) If yes, does your child and/or forced labor policy See also: cover suppliers and vendors? Yes/No
Why is it measured? The presence and effective implementation of policies on this issue are a basic expectation of socially
responsible conduct. Working conditions that run counter to prevailing laws expose the company to
significant risk. [GRI]
Connections to • GRI: 103-2 (See also: GRI 408: Child Labor 2016, GRI 409: Forced or Compulsory Labor, and GRI 414:
Frameworks Supplier Social Assessment 2016)
• SDG: 8
• UNGC: Principle 4,5

Notes & Sources Cite public content, if available; Reference ILO & UNDHR standards, if possible.
S10. Human Rights

S10.1) Does your company follow a human rights policy? Yes/No
S10.2) If yes, does your human rights policy See also: cover suppliers and vendors? Yes/No
Why is it measured? Adherence to a strong human rights policy often leads to enhanced productivity, better human capital
dynamics, and lower risk
Connections to • GRI: 103-2 (See also: GRI 412: Human Rights Assessment 2016 & GRI 414: Supplier Social Assessment 2016)
Frameworks • SDG: 4, 10, 16
• UNGC: Principle 1, 2
• SASB: General Issue / Human Rights & Community Relations (See also: SASB Industry Standards)

Notes & Sources Reference ILO & UNDHR standards, if possible.

See also: Universal Declaration of Human Rights (UN, 1948)
Governance Metrics
Companies may elect to report any or all of the Governance metrics below, per stakeholder guidance, industry or sector
standards, or materiality assessment implications. Please use a "respond or explain" rationale when following this
recommendation. If a certain response is omitted, use the comment area to explain the reasons why (i.e., “immaterial”).
All responses are intended to be reported annually, unless otherwise indicated, and the time scope should be noted.
G1. Board Diversity

G1.1) Percentage: Total board seats occupied by women (as compared to men)
G1.2) Percentage: Committee chairs occupied by women (as compared to men)
Why is it measured? Research tends to indicate an increased number of women in the boardroom is linked to better business
results, including: strong financial performance, ability to attract and retain top talent, heightened innovation,
enhanced client insight, strong performance on non-financial indicators, and improved board effectiveness.
How is it measured? The percentage of female directors and committee chairs, relative to male colleagues in the same groups
Why is it disclosed? This information can signify the organization’s efforts to implement inclusive practices and the optimal use of
available labor and talent. An uneven pattern of promotion and seniority by gender can indicate risks related to
workplace inequity. Some investors specifically target more diverse (or gender-balanced) company boards. [GRI]


Notes & Sources Companies may elect to disclose performance targets for G1
G2. Board Independence

G2.1) Does company prohibit CEO from serving as board chair? Yes/No
G2.2) Percentage: Total board seats occupied by independents
Why is it measured? The presence of a high-functioning, semi-independent board is often a good indicator of other effective practices
How is it measured? Companies with such a rule on the record may respond affirmatively; the number of "Independent Directors"
(as defined in the board rules or corp[orate charter) as compared with other board members is also calculated
Why is it disclosed? Stakeholders use this metric to evaluate the efficacy and modernity of the company's governance structure
How is it disclosed? As text, with appropriate links to public content (S2.1); As a number, trended over time (and compared
against historical and industry averages, if possible) (S2.2)

Frameworks

Notes & Sources See also: Independent & Outside Directors: Research Spotlight (Stanford Graduate School of Business, 2015)
G3. Incentivized Pay

Are executives formally incentivized to perform on sustainability? Yes/No
Why is it measured? The relative seriousness of a company's organizational emphasis upon ESG — and its willingness to invest in
same — is easily indicated
How is it measured? If executives are financially incentivized to perform on ESG metrics, the company may affirmatively respond
Why is it disclosed? To usefully illustrate a key talent and labor issue within companies

Frameworks
Percentage of 42%
Notes & Sources See also: A New Agenda for the Board of Directors: Adoption and Oversight of Corporate Sustainability
(UNGC Lead, 2012)
G4. Collective Bargaining

Percentage: Total enterprise headcount covered by collective bargaining agreement(s)
Why is it measured? This facilitates local responses to a globalized economy, and serves as a basis for sustainable growth
and secure investment returns. The results help bridge the widening representational gap in global work
arrangements, and facilitate the input of those people, regions and economic sectors — especially women and
informal sector workers — who otherwise may be excluded from participating in processes that build decent
work environments. [UNGC]
How is it measured? By measuring the number of employees governed by collective bargaining protocols against the total
employee population
Why is it disclosed? To usefully illustrate a key talent and labor issue within companies

• UNGC: Principle 3
Percentage of 39%
Notes & Sources See also: Conventions, Recommendations, and Principles of the International Labour Organization (ILO)
G5. Supplier Code of Conduct

G5.1) Are your vendors or suppliers required to follow a Code of Conduct? Yes/ N
G5.2) If yes, what percentage of your suppliers have formally certified their compliance with the code?
Why is it measured? By actively managing ESG performance and governance throughout the supply chain, companies act in their
own interests, the interests of their stakeholders and the interests of society at large. [UNGC]
How is it disclosed? As text, with appropriate links to public content (G5.1); As a number, trended over time (and compared
against historical and industry averages, if possible) (G5.2)
Connections to • GRI: 102-16, 103-2 (See also: GRI 308: Supplier Environmental Assessment 2016 & GRI 414: Supplier Social
Frameworks Assessment 2016)
• SDG: 12
• UNGC: Principle 2, 3, 4, 8
• SASB: General Issue / Supply Chain Management (See also: SASB Industry Standards)

Notes & Sources "Percentage" can be defined by number or expenditure.
G6. Ethics & Anti-Corruption

G6.1) Does your company follow an Ethics and/or Anti-Corruption policy? Yes/No
G6.2) If yes, what percentage of your workforce has formally certified its compliance with the policy?
Why is it measured? This code illuminates company values and a commitment to high standards of ethical conduct. Demonstrating
a "good faith effort" to prevent illegal acts may reduce the financial risks associated with government fines for
ethical misconduct.
How is it disclosed? As text, with appropriate links to public content (G6.1); As a number, trended over time (and compared
against historical and industry averages, if possible) (G6.2)
Connections to • GRI: 102-16, 103-2 (See also: GRI 205: Anti-Corruption 2016)
• UNGC: Principle 10

Notes & Sources "Percentage" is defined by total FTE headcount
G7. Data Privacy

G7.1) Does your company follow a Data Privacy policy? Yes/No
G7.2) Has your company taken steps to comply with GDPR rules? Yes/No
Why is it measured? Data privacy, protection, and stewardship has become a prevalent issue, specifically in the context of a
digital economy; many stakeholders assert that virtualized identity and property should be vigorously
protected, and they use this metric to measure the sophistication of a company's risk and security protocols.
Connections to • GRI: 418 Customer Privacy 2016

Frameworks • SASB: General Issue / Customer Privacy, Data Security (See also: SASB Industry Standards)
Percentage of N/A
Notes & Sources GDPR: General Data Protection Regulation

See also: Privacy & Data Protection Principles (UN Global Pulse)
G8. ESG Reporting

G8.1) Does your company publish a sustainability report? Yes/No
G8.2) Is sustainability data included in your regulatory filings? Yes/No
Why is it measured? This indicates the presence or absence of public communications regarding company ESG performance, and
the embedding of such data in regulatory filings
How is it measured? Does your company publish a sustainability report: Yes, No? If yes, the location of relevant public
information should be declared. And does your company include ESG data in its regulator filings: Yes, No?
Why is it disclosed? Increasing data availability and access. In addition, many investors draw a distinction between ESG
data that is incorporated into a financial disclosure or annual report, or only available via stand-alone
sustainability report. Many investors have expressed their preference for embedding ESG data in more
traditional financial disclosures.

Frameworks

Notes & Sources See also: Revealing the Full Picture: Your Guide to ESG Reporting (London Stock Exchange, 2018)
G9. Disclosure Practices

G9.1) Does your company provide sustainability data to sustainability reporting frameworks? Yes/No
G9.2) Does your company focus on specific UN Sustainable Development Goals (SDGs)? Yes/No
G9.3) Does your company set targets and report progress on the UN SDGs? Yes/No
Why is it measured? This illustrates the company’s history of engagement with sustainability reporting frameworks that most
investors value.
How is it measured? Does your company publish a GRI, CDP, SASB, IIRC, or UNGC report? If yes, the location of relevant public
information should be declared for each framework
Why is it disclosed? Corporate disclosure enhances data availability and access, specifically for investors

Frameworks

Notes & Sources Cite specific frameworks used

See also: Disclose What Matters: Bridging the Gap Between Investor Needs and Company Disclosures on
Sustainability (Ceres, 2018)
G10. External Assurance

Are your sustainability disclosures assured or validated by a third party? Yes/No
Why is it measured? This indicates the relative trustworthiness of the sustainability data published by the company through
various reporting channels
How is it measured? Are your company's ESG disclosures assured or validated by a third party: Yes/No? If yes, please identify the
audit/validation entity and the location of any relevant public information.
Why is it disclosed? Investors often use this metric to determine the “investment-worthiness” of self-reported ESG data

Percentage of 38%
Notes & Sources Cite third party assurance partner.

See also: Sustainability Assurance Services: From a Niche to Mainstream (The CPA Journal, 2018)
Explanation of Revisions (2019)

The notes below briefly explain the ESG data changes between the initial publication of this guide (2017) and the current version
(2019). Changes to the 2017 version are noted under their original labels; entirely new metrics are explained at the end. As
mentioned in the prefatory content, these changes were primarily driven by three factors: WFE revisions to the ESG data set,
new developments in the ESG reporting space, and feedback received from Nasdaq stakeholders—in particular, the participants in
an 2018 ESG Reporting Pilot Program. We are grateful for their assistance.
Environmental Metrics
E1. Direct & Indirect GhG Emissions

Renamed as "GHG Emissions" because not all companies have direct and indirect reporting, thus the label was inaccurate
E2. Carbon Intensity

Renamed as "Emissions Intensity" per example set by the TCFD, and added TCFD qualifying language
(Emissions per output scaling factor: revenues, sales, units produced, etc.)
E3. Direct & Indirect Energy Consumption

Renamed as "Energy Usage" in an effort to simplify language
E4. Energy Intensity

No substantial change
E7. Water Management

Renamed as "Water Usage" in an effort to simplify language
E8. Waste Management

We found this metric to be virtually unreported, so it was eliminated in favor of a broader policy disclosure in E9 (e.g., “a company's
EP should include a WM strategy”)
E9. Environmental Policy

No change, other than increase in scope described above
E10. Environmental Impacts

User feedback indicated confusion over the meaning and value of this metric, and it was virtually unreported, so it was eliminated
E5. Primary Energy Source

Eliminated metric in favor of combining with E6 ("Energy Mix")
E6. Renewable Energy Intensity

Renamed as "Energy Mix" per TCFD and others (Percent of energy by source type: renewable, hydro, coal, oil, natural gas)
Social Metrics
S1. CEO Pay Ratio

Realigned this metric with a more specific Dodd-Frank (US) regulatory requirement (“median vs. mean”)
S2. Gender Pay Ratio

S3. Employee Turnover Ratio

Renamed as "Employee Turnover" in an effort to simplify language
S4. Gender Diversity
Revised metric to focus on more meaningful "headcount" rather than FTEs
S5. Temporary Worker Ratio

Revised metric to focus on more meaningful "headcount" rather than FTEs
S6. Non-Discrimination Policy

S7. Injury Rate

Revised the previous calculation (2015) to better align with GRI Standards
S8. Global Health Policy

Revised metric to emphasize publication of policy
S9. Child & Forced Labor Policy

S10. Human Rights Policy

S11. Human Rights Violations

This metric was regretfully removed from the list; though important, this data is rarely reported in ESG disclosures, and does not easily
12. Board - Diversity

Recategorized as a "Governance" issue; also realigned some of the Board issues related to “independence” and “separation of powers”
Governance
G1. Separation of Powers

Added "independents" as a subcategory in the new metric
G2. Board - Transparent Practices

User feedback indicated confusion over the meaning and value of this metric, and it was virtually unreported, so it was eliminated
G3. Incentivized Pay

G4. Fair Labor Practices

Revised and renamed in order to better align with GRI Standards 407 & 102: "Percentage of headcount covered by collective
bargaining agreements"
G5. Supplier Code of Conduct

G6. Ethics/Code of Conduct

Metrics G6 and G7 were combined into a single metric, because so many companies have embedded BACs in their Ethics code
G7. Bribery/Anti-Corruption Code

Metrics G6 and G7 were combined into a single metric, because so many companies have embedded BACs in their Ethics code
G8. Tax Transparency

This metric was regretfully removed from the list; though important, this data is rarely reported in ESG disclosures, and does not easily
G9. Sustainability Report

Recategorized as a true Governance issue; renamed as "Sustainability Reporting" for clarity; scope of reported metric expanded
(10k, etc.)
G10. Other Framework Disclosures

Recategorized as a true Governance issue; renamed as "Framework Disclosures” for clarity
G11. External Validation/Assurance

Recategorized as a true Governance issue; renamed as "External Assurance" for clarity
New Metrics
E8. Climate Oversight / Board

This metric was created to better align with TCFD recommendations; beyond a yes/no answer, companies could delve into frequency,
scope, and goal-setting

This metric was created to better align with TCFD recommendations; beyond a yes/no answer, companies could delve into frequency,
scope, and goal-setting
E10. Climate Risk Mitigation

This metric was created to better align with TCFD recommendations; tracks the amount invested in development or deployment of low-
carbon products, energy resilience, services and/or technologies
G7. Data Management

Emerging consensus on data privacy stewardship and management as key sustainability issues—and related regulatory requirements,
such as GDPR—demanded the creation of this new metric
Our changes were primarily driven by three

factors: WFE revisions to the ESG data set, new
developments in the ESG reporting space, and
feedback received from Nasdaq stakeholders.
Appendix 1: Local Rules & Regulations

European businesses are now aware of an emerging regulatory The EC actively advocates for greater corporate social
effort from the European Commission (EC). This “Directive” responsibility (CSR). “The Commission promotes CSR in the
(technically, Directive 2014/95/EU) requires large companies to EU and encourages enterprises to adhere to international
disclose non-financial and diversity information on an annual guidelines and principles,” the Commission has said. “The
basis. The directive was first launched in December 2014, and EU’s policy is built on an agenda for action to support this
it itself an amendment to a previous effort (Directive 2013/34/ approach.” The reasons for this outreach are made clear: CSR
EU) targeting better financial statements in general. EU nations offers real benefits for companies (better risk oversight, lower
must begin to implement the Directive in 2018, so that costs), markets (investor trust, sustainable capital flow), and
companies may report for the 2017 financial year. society (reduced inequalities, economic transformation).
This is an expansion of the existing reporting rules, This kind of regulatory effort is not limited to Europe. When
requiring broader disclosure of “non-financial” performance it comes to governments requiring corporate disclosure of
measures. The Directive requires companies to append a ESG factors, at least 14 members of the G20 and 32 of the
management report to their financial statement that covers 50 largest country economies have at least one regulation
many environmental, social, and corporate governance (ESG) covering an aspect of environmental, social, and governance
matters, including: disclosure. As these global regulatory actions continue to
emerge, both in Europe and beyond, there are institutions
• Environmental matters
tracking their progress and potential impact. The UN PRI, for
• Social and employee matters example, maintains a current database of this information.
• Respect for human rights Local country governance codes have been commonplace
• Anti-corruption and bribery matters in the Nordics, but now we are seeing new ones emerge in
Japan. New legislation in China (February 2018) focuses on
• Diversity in the Board of Directors
mandatory environmental disclosures; UK rules mandate
The format of this disclosure, however, is not clearly human rights and anti-slavery disclosures. France raised the
understood. “There is significant flexibility for companies to stakes by requiring investors to more transparently report
disclose relevant information,” the guidelines state, and they climate and social risks in their portfolios.
“may rely on international, European or national guidelines.”
In the U.S. there are ESG-related efforts underway—the Dodd
There is an underlying “comply or explain” rationale included;
Frank reform bill, Department of Labor guidance for retirement
companies not willing or able to report on these issues must
plans, SEC taking a fresh look at decades of stale reporting
provide valid reasons for their refusal.
protocols (Regulation SK)—but that regulatory momentum has
The new disclosure requirements apply to large public interest slowed. Yet American companies are still voluntarily disclosing
entities with more than 500 employees. “Public-interest ESG data in record numbers, and find themselves subject to a
entities” include all companies listed in EU markets and growing web of ESG reporting requirements abroad.
even some unlisted companies (credit institutions, insurance
firms, etc.) that Member States designate for inclusion due to
business type, activity, or size. At first glance, there seems to
be about 6,000 companies covered by the Directive—including
some based outside the EU.
European businesses are now aware of an

emerging regulatory effort from the European
Commission (EC). This “Directive” (technically,
Directive 2014/95/EU) requires large companies
to disclose non-financial and diversity
information on an annual basis.
Appendix 2: Research Sources

• MSCI research from 2007 to 2017 shows that companies • Over the past five years, 70% of U.S. investors have
in the bottom quintile of the their World Index experienced increased their allocation to ESG investments.
large drawdowns (above 95%) three times higher than [Shroders, 2017]
those in the top quintile, supporting the assertion that ESG
• In 2018, 43% of U.S. institutional investors—endowments,
provides market insight into risk valuation.
foundations and pension plans—incorporated ESG factors into
• BlackRock researched traditional equity indexes alongside their decision-making process, nearly twice the percentage in
ESG-focused versions and found that annualized returns 2013. [Kiplingers, 2018]
since 2012 matched or exceeded the standard index in both
• A 2014 metastudy from the University of Oxford found that
developed and emerging markets.
86% of the reviewed papers showed positive correlation
• According to State Street research (2018), more than two- between company operational performance and ESG
thirds (68%) of institutional asset managers report that dynamics.
integration of ESG has significantly improved their returns.
• The Journal of Sustainable Finance & Investment published
• “[Our results] show significant outperformance of the top ESG a metastudy in 2015 that demonstrated a 90% non-negative
momentum quintile over the bottom quintile, corresponding relationship between ESG and financial performance, among
with the findings from our transmission channel analysis: other findings. [ESG and Financial Performance: Aggregated
An improvement in ESG characteristics has led to increasing Evidence from More than 2000 Empirical Studies]
valuations over time.” [Foundations of ESG Investing, MSCI
• According to a 2017 State Street Global Advisors survey of
2017]
a large and diverse array of institutional investors, 92% of
• From 2001 to 2014, the revenue of “long-term-minded” firms the respondents want companies to report on ESG issues and
cumulatively grew on average 47% more than the revenue 80% want better ESG reporting standards.
of other firms, and with less volatility. Cumulatively the
• A similar finding was reported by EY in 2017 [Is your
earnings of these firms grew 36% more on average over this
nonfinancial performance revealing the true value of your
period than those of other firms, and their economic profit
business to investors?]
grew 81% more on average. [McKinsey Global Institute, 2017]
• “Integrating ESG criteria into passive strategies generally

improved risk-adjusted performance over the period 2007
to 2016 and tilted the portfolio towards higher quality
and lower volatility securities.” [Factor Investing and ESG
Integration, MSCI 2016]
• Since the U.S. presidential election (2016), as much as $8.1

billion has flowed into U.S. equity sustainable funds, marking
a 13.1% surge in the assets under management. This inflow
has been the largest percentage inflow into any class or style
of fund. [Ethical Investing Thrives When There’s ‘Bad’ News,
Wall Street Journal]
• More than 70% of all investors are interested in socially

responsible investing, according to Morningstar research,
while more than 80% of millennials seek to go socially
responsible on their investment decisions.
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What is the purpose of this guide?

What is the purpose of this guide?

What stakeholders are mentioned as users of ESG data?

What stakeholders are mentioned as users of ESG data?

ESG

Expanded choice and opportunity in the new ‘markets

We are currently at the forefront of building the

Using This Guide................................................................................... 4

Sustainable Development Goals...................................................12

Appendix 1: Local Rules & Regulations..................................... 33

Appendix 2: Research Sources...................................................... 34

This new version of the ESG Reporting Guide is intended to

• Incorporate new developments in the marketplace (such as

• Simplify and standardize guidance, labels, and calculations

• Improve ESG engagement for small- and medium-sized What Is ESG?

Compliance and Risk Management

• Other Stock Exchanges

• Our Current (and Future) Employees

Stakeholders must be taken into account. They may be

• Investors. ESG specialist firms like PAX, Parnassus, Aviva,

• Indexers & Innovators. This category includes well-known ESG

For a better understanding of the concept of materiality, we

• Passive investment strategies that seem to limit ESG

• Adoption of ESG data signals as shared value creation tools

To maintain this confidence and trust, we have various

Governments and regulators around the world have started

Exchanges & ESG

Why are stock exchanges involved in ESG?

• Small, iterative changes in reporting practices create profound macroeconomic impacts

Quest for greater insight into corporate performance signals

• The “returns-at-any-cost” mindset creates more risk than reward

• Exchanges are incented to create longer-term listings, longer-term market value

Exchange intervention on ESG has been impactful:

• Nine (9) more exchanges may do so this year (2019)

For a company just beginning their sustainability journey,

• The Global Reporting Initiative (GRI) offers perhaps the

• The Climate Disclosure Project (CDP) focuses almost

The SDG project follows in the wake of the Millennium

Despite that limitation, Nasdaq supports the work of the

• Partnerships for the Goals (SDG 17). Enhancing the global

Environmental (E) Social (S) Corporate Governance (G)

E1. GhG Emissions

Connections to • GRI: 305-1, 305-2, 305-3

Percentage of 80% (report at least one metric)

E2. Emissions Intensity

Connections to • GRI: 305-4

Percentage of 46% (report at least one metric)

E3. Energy Usage

How is it measured? Typically measured in megawatt-hours (MWh) or gigajoules (GJ)

Connections to • GRI: 302-1, 302-2

Percentage of 8% (report at least one metric)

E4. Energy Intensity

Why is it measured? Contextualizes an organization’s resource consumption relative to physical footprint

Connections to • GRI: 302-3

E5. Energy Mix

Connections to • GRI: 302-1

E6. Water Usage

Connections to • GRI: 303-5

Percentage of 3% (report at least one metric)

E7. Environmental Operations