Navigating sustainability: Understanding double materiality in insurance
Navigating sustainability: Understanding double materiality in insurance
Article Frans Kuys, Principle Consultant Finalyse
The concept of double materiality in corporate sustainability reporting has been discussed and debated for several years as sustainability, ESG and climate related disclosure requirements were being developed by many standard-setting bodies.
With the SEC in the US having issued their final requirements for climate-related disclosures on 6March2024, we can compare their requirements with the EU’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB).
The CSRD standards include specific materiality assessment requirements for both the financial and impact aspects, or “double materiality”. On the other hand the SEC and ISSB require a financial materiality assessment only, often referred to as “single materiality”. The focus on the financial assessment is likely driven by the fact that the riskiness of their returns is the top priority for most investors. However, investors are becoming more concerned with the influence they can have on improving sustainability and ESG issues. The CSRD standard addresses this desire for information with the double materiality disclosure.
