Dynamic Materiality: Measuring What Matters

18 Pages Posted: 24 Feb 2020

See all articles by Thomas Kuh

Thomas Kuh

Truvalue Labs

Andre Shepley

Truvalue Labs

Greg Bala

Truvalue Labs; FactSet

Michael Flowers

Truvalue Labs

Date Written: January 17, 2020

Abstract


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

Suggested Citation

Kuh, Thomas and Shepley, Andre and Bala, Greg and Flowers, Michael, Dynamic Materiality: Measuring What Matters (January 17, 2020). Available at SSRN: https://ssrn.com/abstract=3521035 or http://dx.doi.org/10.2139/ssrn.3521035

Thomas Kuh

Truvalue Labs ( email )

660 Mission Street, 4th flr
San Francisco, CA 94105
United States

Andre Shepley (Contact Author)

Truvalue Labs

660 Mission Street, 4th flr
San Francisco, CA 94105
United States

Greg Bala

Truvalue Labs ( email )

1700 Montgomery Street
San Francisco, CA 94111
United States

HOME PAGE: http://www.TruValueLabs.com

FactSet ( email )

601 Merritt 7, 3rd Floor
Norwalk, CT 06851
United States

Michael Flowers

Truvalue Labs ( email )

660 Mission Street, 4th flr
San Francisco, CA 94105
United States

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