ABSTRACT

Materiality has been crucial in finance for many decades (Messier et al., 2005), referring to information that, if omitted or misstated, “could influence decisions that users make on the basis of financial information about a specific reporting entity” (IFRS, 2018:2). Traditionally, materiality has focused on issues that concern investors. In contrast, materiality has a broader scope in sustainable finance and considers issues relevant for all stakeholders (Whitehead, 2017), that is, environmental, social, and governance (ESG) issues. These issues can impact the business performance, but also the business activities have significant impacts on environmental, social, and governance dimensions. Consequently, a materiality assessment in the sustainable finance context must include economic and ESG issues and focus on aligning business – strategies and operations – and stakeholders (AccountAbility, 2018). Many sustainability accounting and reporting standards, guidelines, and regulatory frameworks have refined the materiality concept, such as the Global Reporting Initiative’s (GRI) G4 guidelines, the International Integrated Reporting Framework, the Sustainability Accounting Standards Board, the European Union (EU) Commission Directive on non-financial reporting, the EU Sustainable Finance Disclosure Regulation, and the EU Corporate Sustainability Reporting Directive. These sustainability frameworks encourage companies to evaluate which non-financial information matters to be reported together with financial information. According to GRI G4 guidelines, material topics for a reporting organization should “include those topics that have a direct or indirect impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large” (Global Reporting Initiative, 2011:3). Materiality is an umbrella notion that includes other closely connected concepts, such as “financial materiality,” “non-financial materiality,” and “double materiality.”