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Yale Initiative on Sustainable Finance (YISF)

Defining and Applying Materiality to Guide Corporate Disclosure

Yale Initiative on Sustainable Finance (YISF)

1. Processes to Define Materiality for Shareholders

In financial terms, a piece of information is said to be material when it is likely to alter the investment decisions of a rational investor. Under the current legal and accounting frameworks, material information must be reported in the financial statements of publically listed companies. But what is material in a sustainability context may not be seen as material in a financial one. As a growing number of mainstream investors are expressing interest in the sustainability performance of the companies in their portfolios, this disconnect becomes more problematic.

This research project, in partnership with the World Business Council For Sustainable Development and the Global Reporting Initiative (GRI), seeks to understand the scope of this disconnect, the reasons for the divergent views of what is material, and ways that the gap can be closed.

These challenges were discussed with companies and investors during two roundtables, one each in September 2017 and March 2018. Based on the comments received, YISF and GRI will develop a market guidance on companies reporting.

Learn more about the findings of our research in Todd Cort's short video below. 

Todd Cort, lecturer on Sustainability at the Yale School of Management, summarizes the results of YISF's research on corporate disclosure and sustainability disclosure for investors.

Yale wbcsd cover

Read our publication on materiality in the food sector here

2. Corporate Sustainability Disclosure and Liability Risk

YISF is also exploring the evolution of companies’ liability in regards to sustainability disclosure. Through a legal review of US case law triggered by investors and consumers, YISF analyzed the evolutions in the ways courts deal with omission and misleading information related to sustainability in corporate disclosure.

Strauss, D., Ajax, C. (2018) Corporate Sustainability Disclosures in American Case Law: Purposeful Or Mere “Puffery”?

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