What Constitutes a Material ESG Strategy and Its Impact

Cameron Balch, Director, of Impact Cooperative gives his analysis of what constitutes a material ESG and the impact it will have on the environment and broader society.

Cameron’s Thoughts:

The last big announcement was the alignment between what the ISSB and what the EU and other jurisdictions have been working on. There have been disagreements in the past on what constitutes a material ESG impact, so how do we determine what impacts your organization?

So from a classical, financial accounting perspective, it’s what impacts the value of your organization, your ability to create value, and that’s just called price value materiality. A new way to think about that on the ESG track is called double materiality. So we look at the fiscal value of the project while also considering its impact on the environment and society as a whole.

So by keeping both of those, it doubles what you’re considering as having an impact on your organization. The EU has been a long-time champion of this. Their original emphasis was on classical materiality, but they are now aligning themselves with the EU to maintain some compatibility between what they are going to publish next year and what is already on the books legally in the European Union.