Do Sustainability Reports Contain Financially Material Information?

48 Pages Posted: 6 Dec 2021 Last revised: 3 Mar 2023

See all articles by Suzanne (Burzillo) Haley

Suzanne (Burzillo) Haley

San Jose State University - Lucas College of Business

Matthew Shaffer

University of Southern California; University of Southern California - Marshall School of Business

Richard G. Sloan

University of Southern California - Leventhal School of Accounting

Date Written: May 27, 2024

Abstract

Recent years have witnessed significant growth in corporate sustainability reporting. Yet existing research provides mixed evidence on the information content of these reports for investors. We examine the stock market reaction to the announcement of corporate sustainability reports incorporating SASB metrics that are intended to provide financially material and decision useful information to investors. Using standard measures, we are unable to find compelling evidence that these reports provide a significant amount of decision-useful information to investors. Further analysis of a subset of common metrics indicates that they are either financially immaterial or preempted by traditional financial disclosures. Finally, we show that firms target sustainability reports at a broad set of stakeholders concerned with environmental and social impacts and conclude that a narrow focus on financial materiality to investors is unnecessarily restrictive.

Keywords: Sustainability, Disclosure, Materiality

JEL Classification: G1, M4

Suggested Citation

(Burzillo) Haley, Suzanne and Shaffer, Matthew and Sloan, Richard G., Do Sustainability Reports Contain Financially Material Information? (May 27, 2024). USC Marshall School of Business Research Paper Sponsored by iORB, Available at SSRN: https://ssrn.com/abstract=3976550 or http://dx.doi.org/10.2139/ssrn.3976550

Suzanne (Burzillo) Haley

San Jose State University - Lucas College of Business ( email )

San Jose, CA 95129
United States

Matthew Shaffer

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Richard G. Sloan (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

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