Material ESG issues are those governance, sustainability or societal factors likely to affect the financial condition or operating performance of businesses within a specific sector. We focus on material ESG metrics. What does that mean? It means we do not present every ESG data point we can find in the hope that 'more is better'. Instead we surface and analyse in detail those metrics which, if poorly managed, will negatively impact the enterprise value of a company.
It’s about understanding which ESG issues matter to the business. And with ESG materiality presenting a moving target, reducing ESG risk and opening up associated opportunities requires a robust means of assessing it.
- We utilise the research and frameworks of leading organisations to ensure the data captured is material to the company (and its sector) or country.
- We measure the materiality of any given issue by calculating the degree to which it is either adding to or detracting from a business when compared with the sector average impact of that issue. In this way, organisations can view their ESG materiality compared to their peers and the industry as a whole.