In ESG programs, there are many different items to be considered. In this episode, Tom Fox takes a look at one of them - materiality.  

The Materiality Debate 

The traditional view of financial materiality is that it directly impacts a company's economic valuation. Recently, SEC commissioners have discussed it in a broader concept, encompassing data that investors deem important. Materiality, today, is whether there is a substantial likelihood that the disclosure of an admitted fact would be viewed as having significantly altered a total mix of available information. “The impact of any particular piece of information thus remains a key element of materiality,” Tom says. 

Information that Investors Tend to Call For 

The scope of information has expanded far beyond financial data, now including categories such as human capital, DEI, social justice, corporate governance, and climate change. Though some disagree with this development, much of the investing community does want to see a broader amount of information in materiality, going forward. It is Tom’s view that, “The time when investors could be satisfied with generalized statements certainly seems to be behind us.” 

Questions Companies Should Ask Themselves about Their ESG Program 

Tom checks out a post by Lawrence Heim and discusses some of the questions that are detailed, including: 

“As you devise metrics to track ESG, you have to be aware of current or other changes. But once again, this is what compliance officers do day in and day out,” Tom remarks. This is yet another reason Tom advocates that compliance should lead the ESG effort going forward. 

RESOURCES 

Tom Fox’s email

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