ESG Reporting as a Means to Leverage Interest by Investors in Next Generation LWR and Advanced Nuclear Reactors

An opportunity exists for the global nuclear energy industry to attract investment capital and/or to lower the cost of capital, by focusing on investors who are committed to (environmental, social, governance) ESG investing.


Background The key organization for engagement in this process is the Sustainability Accounting Standards Board (SASB) which is now part of the Value Reporting Foundation.

sasb logo

SASB Standards connect businesses and investors on the financial impacts of sustainability. SASB has published a standard for electric utilities and power generators, but its coverage does not address the technology development efforts now underway for 4th generation advanced reactors and new types of light water reactors such as small modular reactors and mini reactors nor their uses beyond electricity production.

A key next step, especially for developers of a new generation of LWR and advanced reactors, is to create a working group to develop a new SASB standard, or modify an existing standard, that addresses Environmental, Social and Governance (ESG) reporting requirements associated with the development, construction, and operation of nuclear reactors for electric power generation, process heat, hydrogen production, and desalinization of sea water.

Compliance with SASB standards forms the basis for materially significant reports to investors on how well a firm is doing relative to the principles of environmental, sustainable, and governance (ESG) elements of its operations and that of its supply chains.

Sustainable investing generally refers to the full consideration of environmental, social, and corporate governance, or ESG, concerns within an investment strategy, both to enhance investment performance, and contribute to better societal outcomes.

The basic consideration of Environmental, Social and Corporate Governance (ESG) issues to enhance investment performance has also become widespread even among traditional investment managers, who are beginning to recognize the materiality of ESG risks and opportunities in security selection.

  • The environmental data elements of an ESG report cover items like climate change, pollution/waste management, as well as prospective actions like green buildings and clean technologies.
  • The social data elements of an ESG report cover relations with internal and external stakeholders, not just stockholders.
  • The governance data elements of an ESG report in broad terms it covers all aspects of corporate behavior internally and externally.

Examples of ESG Reporting Topics

Table: FASB Staff Educational Paper “Intersection of Environmental, Social, and Governance Matters with Financial Accounting Standards,” March 21, 2021

Discussion Companies prepare ESG reports in compliance with SASB standards and its “materiality map.” SASB’s Materiality Map identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within an industry. SASB identifies 26 sustainability-related business issues which encompass a range of Disclosure Topics and their associated Accounting Metrics that vary by industry. So far 77 industries are covered, but the nuclear energy industry, especially new reactor development, is not one of them. It is bundled in with all other utilities including coal, natural gas, and renewable energy technologies like solar and wind.

The reason a nuclear reactor developer would want to prepare and publish a materially significant ESG report is to attract ESG driven investors to fuel growth and to fund efforts to bring their technologies to market.

There has been a paradigm shift, especially among investors who want their funds to be a force for good. They care about what their funds and investments are doing and given a choice will select an ESG compliant firm every time. A firm that meets these requirements can attract more capital or lower the cost of capital.

ESG Momentum is Building

There is a lot of ESG money available globally from institutional investors, families, sovereign wealth funds, etc., looking for firms that can present a credible ESG report.

According to a Bloomberg Law Analysis published on March 25, 2021, the number of current S&P 500 members citing climate change or greenhouse gas under risk factors in their annual 10 K filings with the Securities and Exchange Commission increased by nearly 400% from 2019 to 2020 (60 companies in 2019 to at least 220 companies in 2020).

Why Would a Developer of New Nuclear Energy Technologies Want to do This?

  • Your company will be sending a signal to the capital markets that you plan to be a player at the table of sustainable finance. Analysts will want to discuss your company’s management of ESG Risks with you in quarterly calls
  • Your firm will be telling socially conscientious customers that you are ready to do business with a purpose. Decarbonization is a key to addressing climate change. This is your opportunity to convince investors that nuclear energy is the place for their investments to achieve this outcome.
  • Your firm will be signaling regulators that you are ready to offer your assistance in shaping the rules and regulations that affect your business and your industry. Sooner than you think, regulatory agencies in the U.S. and other countries, will propose rules related to sustainability related financial reporting.

Recommendation The opportunity for the global nuclear energy industry is to organize a task force of its members, especially those interested in building the next generation of LWR and advanced reactors, to identify either changes to the current SASB standard for Electric Utilities & Power Generators or to work with SASB to develop a revised or a new standard that establishes a basis for ESG reporting for the nuclear energy industry.

The engagement of trade groups, professional scientific societies, and standards development organizations that address the needs of the nuclear industry would add credibility to the effort.

The two main benefits of such a task force being successful are to enable ESG driven investors to justify putting their funds into nuclear energy projects, and to tell the story of the industry to the public as well as business and government decision makers.

Finding ways to tell a firm’s ESG story, while it is in startup mode, is a key challenge that could also be addressed by such a group. As a practical matter, until a firm has reportable earnings of over $50M/year, ESG ratings agencies aren’t going to pay attention. Also, there are multiple issues over which set of standards a firm should use to prepare an ESG report.

Using ESG Reports to Attract Investors

prudent investor

Put first things first. Find out what ESG indicators potential investors want to see in an “ESG” report from a startup developer of a new nuclear energy technology. In other words, understand your stakeholders’ expectations first, then work on aligning your company’s operations and ESG reports to meet them.

Start by identifying your key investor stakeholders and seek to understand their expectations for sustainability disclosure, including the standards and frameworks they prefer stock issuers to focus on. Knowing this first is the key to unlocking access to ESG driven investors.

  • When engaging with institutional investors on ESG matters, your questions may include:
    » What issues and topics do they consider “material” in your industry?

    » How often do they read and evaluate ESG disclosures? Do they use them to make investment decisions?

    » How do they use both the data and narrative discussion in your ESG disclosures?

  • An Engagement Guide on the SASB Standards can be used by the industry to develop their approach to investors and to their own work on developing ESG reports. This guide is a useful starting point for businesses in preparing for discussions about ESG with investors.

Two Key Notes About the Role of Senior Leadership

Don’t run out and buy an ESG software reporting tool or hire a consulting firm to help with the SEG reporting effort at least, or until, there is buy-in from the front office. This is not something that can be developed at a staff level and then percolated to senior management.

ESG reporting as a means to attract investment capital has to be driven from the top or it will fail. This is especially important in terms of compliance with current securities laws and regulations.

ESG Accountability Disclosures are Right Around the Corner

According to Deloitte, on top of investor demand and stakeholder pressures for sustainable driven investing, attention from U.S. regulators is driving expectations that climate-related and other sustainability disclosures will soon become part of the regulatory environment, making it essential that companies start preparing for the day when it is part of the regulatory environment..

nt matrix

Table: Methodology Measures for Northern Trust ESG Vector Score

It is clear that climate-related and other ESG regulations are on the horizon. SEC Commissioner Allison Herren Lee has directed the SEC’s Division of Corporation Finance to enhance its focus on climate-related disclosures in public company filings, and also see SEC Chair Gary Gensler’s recent statement that the SEC has the necessary rulemaking authority on climate, human capital, and other environmental, social, and governance (ESG) disclosures.

Ahead of the changing regulatory environment, companies may need to rapidly enhance their existing disclosures if the oversight mechanisms the SEC applies to climate-related and other ESG disclosures are similar to those for financial reporting.

U.S. Regulatory ESG and Climate-Related Developments

As detailed in Deloitte’s March 22, 2021, Heads Up and the May 2021 issue of Deloitte Digest, recent developments in the United States concerning climate regulation, reporting, and compliance policy include:

  • The Commodity Futures Trading Commission (CTFC) established a new climate risk unit.
  • The Federal Reserve created two committees to identify, address, and respond to climate-related risks to financial stability.
  • The FASB released a staff educational paper on intersection of ESG matters with financial accounting standards.
  • The SEC announced the formation of the Climate and ESG Task Force, requested input on whether current climate change disclosures adequately informed investors, issued a risk alert on ESG investing, and established a Web site to highlight actions and provide ESG investing information.
  • The House Financial Services Committee advanced the Climate Risk Disclosure Act, which would amend the Securities Exchange Act of 1934 to require disclosures related to climate change.
  • SEC Commissioner Allison Herren Lee gave a speech addressing her views on common misconceptions regarding materiality in the context of ESG disclosure.

What About “Green Washing?”

The practice of greenwashing is driving the hype for ESG. The number one message here is don’t do it.


“Greenwashing” typically occurs when a company or organization makes statements regarding their ESG commitments and performance that cannot be legally supported by the facts.

One reason why greenwashing has been able to slip through the cracks in some places when it comes to investment securities is that there are dozens ESG data providers, consultants, and firms hawking “ESG software” If you hire an ESG reporting firm, do your due diligence on their track record and whether any of the reports they prepared for clients ran into trouble.

Firms that are revealed to have engaged in green washing risk being frozen out of future rounds of ESG investment and, if publicly traded, are also at risk of stockholder lawsuits and potential actions by regulatory agencies.

Note that the EU has taken action on eliminating green washing by issuing the Sustainable Finance Disclosure Regulation (SFDR) alongside the Taxonomy Regulation and the Low Carbon Benchmarks Regulation as part of a package of legislative measures arising from the European Commission’s Action Plan on Sustainable Finance effective from March 10, 2021. The regulation aims to reduce greenwashing and the overstating of green credentials.

The SFDR mainly applies to financial institutions (banks, insurers, asset managers and investment firms) operating within the EU. Non EU entities will be affected indirectly through EU subsidiaries, provision of services in the EU and market pressure.

Global Convergence of ESG Disclosure Standards

In addition to U.S. activity, substantial recent progress has been made to establish global climate-related and other ESG disclosure standards. In April 2021, the IFRS Foundation trustees indicated they were moving forward on their proposal to create an International Sustainability Standards Board (ISSB), which will take into account the work of other standard setters, such as the Task Force on Climate-Related Financial Disclosures and a prototype framework for climate-related disclosures proposed by an alliance of five standard-setters.

It is further evidence that the focus on ESG performance and disclosures will almost certainly increase not only in the U.S., but also in global markets.


SASB’s Materiality Map identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within an industry. In the left-hand column, SASB identifies 26 sustainability-related business issues, or General Issue Categories, which encompass a range of Disclosure Topics and their associated Accounting Metrics that vary by industry.

  • Electric Utilities & Power Generators SASB Standard

The Electric Utilities & Power Generators industry is made up of companies that generate electricity; build, own, and operate transmission and distribution (T&D) lines; and sell electricity. Utilities generate electricity from a number of different sources, commonly including coal, natural gas, nuclear energy, hydropower, solar, wind, and other renewable and fossil fuel energy sources.

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