Dynamic Materiality: Measuring What Matters
18 Pages Posted: 24 Feb 2020
Date Written: January 17, 2020
In recent years, ESG investors have coalesced around the concept of materiality, yet the determination of what sustainability issues are material to companies and industries remains a lively area of discussion. We assert that the stakeholder perspective provides a critical input in determining materiality, as it provides the best proxy for experienced externalities. Grounded in this notion, we introduce the concept of a unique materiality signature for companies, industries, and sectors—one that changes over time. While we argue that materiality exists on a spectrum and is subject to change, we also denote an empirically observed set of core sustainability issues that exhibit broad, persistent, and outsized stakeholders focus over time across industries and sectors. Finally, we examine the implications of our research and identify areas for further study, including new classification systems for companies.
Keywords: Sustainable Investing, ESG, Stakeholders, Finance, Materiality
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