Overview
Materiality is a core principle of financial accounting that offers a practical foundation for identifying which non-financial information matters for investment decisions. Yet today’s disclosure environment makes it difficult for both companies and investors to determine which ESG data is truly relevant for long-term value creation.
A gap persists between the ESG information firms disclose and the information that actually informs management and investment decisions. Understanding what is genuinely business-critical for long-term capital providers remains a challenge.
This research, supported by the Centre for Endowment Asset Management in collaboration with the Bank of New York Mellon, examines the disclosure needs of different stakeholders and seeks to identify what constitutes material non-financial information for long-term investing.
Academic research is moving away from trying to answer whether nonfinancial information is material to long-term value, to identifying which nonfinancial information is material.
The evolving view of materiality
Rising demand for sustainability disclosures, and the growing investment focus on responsible criteria, have prompted research to inform reporting and investment practice. This project, led by Dr Amir Amel-Zadeh, examines the materiality of environmental and social disclosures from the perspective of stakeholders.
The research aims to understand how non-financial information is used in current investment decision-making and how asset managers and asset owners differ or align in their use of that information.
The objective of the research is to assess how well issuers’ disclosure practices are aligned with the expectations and future needs of the investment community.
Related paper
Amel-Zadeh A and Serafeim G, ‘Why and How Investors Use ESG Information: Evidence from a Global Survey’ (2018) 74(3) Financial Analysts Journal 87 https://doi.org/10.2469/faj.v74.n3.2