As defined by the CSRD and ESRS, a matter is financially material if it affects a company's future profitability. This includes factors like global warming, supply chain challenges, and future regulations.
Financial materiality under the ESRS focuses on sustainability matters that generate or may generate material financial effects on the company. This includes impacts on revenue, costs, asset values, access to capital, and cost of capital. Companies must assess financial materiality by evaluating the likelihood of financial effects and their potential magnitude, considering both current and anticipated impacts. Financial materiality works alongside impact materiality to form the double materiality assessment required under CSRD.
Learn how to assess financial materiality for CSRD reporting and explore our guide on the European Sustainability Reporting Standards to understand the full double materiality framework.
See how Coolset helps companies with financial materiality assessments and CSRD compliance →
