Double Materiality, Two Questions
Distinguish financial materiality from impact materiality when reviewing issuer disclosures.
Double materiality works only when you keep the two directions clear. Outside-In: Financial Materiality This lens asks how sustainability issues affect the company. The analyst looks for changes to revenue, cost, assets, liabilities, financing, or resilience. Climate regulation, safety shutdowns, weak governance, and human-capital risk can all become outside-in issues. Inside-Out: Impact Materiality This lens asks how the company affects people and the planet. A severe impact may matter to clients, beneficiaries, regulators, and civil society even before it changes cash flow. For an investor, the next question is whether and how that impact can create a financial transmission channel.…
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