The Materiality of ESG Information: Why It May Matter

Abstract

Given the current attention being paid to environmental, social, and governance (ESG) matters—including in securities regulation circles—and the importance of materiality analyses to various aspects of U.S. federal securities regulation, this Article undertakes to explore the materiality of ESG information, assess its importance to regulatory compliance, identify contexts in which the materiality of ESG information may be especially significant, and make related observations. To accomplish this purpose, the Article proceeds in three parts. To set the stage, the Article defines two critical concepts: ESG information and materiality. Then, the Article isolates disclosure rules operative in common situations that may compel an assessment of the existence and materiality of various kinds of ESG information. Finally, drawing from the assembled knowledge of the identified relevant disclosure rules and their application to ESG information, the Article reflects on the importance of materiality determinations concerning ESG information and the difficulty in making those determinations in the current investment environment.

Keywords: materiality, ESG, securities, disclosure, fraud, insider trading