IDEAS home Printed from https://ideas.repec.org/p/jrs/wpaper/202405.html
   My bibliography  Save this paper

Quantitative assessment of the financial materiality of climate physical risks: a case study

Author

Listed:

Abstract

We offer an applied approach to the double materiality assessment of environmental, social and governance (ESG) matters, which could serve as practical guidance to the 60K companies required by EU regulation (CSRD) to carry out this assessment. Focussing on the financial materiality of climate physical risks, due to its regulatory priority, we provide numerical examples, developed in compliance with all relevant regulatory requirements (ESRS). These examples are based on a generalised methodology, which allows to perform both impact and financial materiality assessments on any sustainability matter, adopting the most suitable sources of information: publicly available scientific data to perform fully transparent ESG risk estimates and expert judgment (of firm managers and/or advisors) to consider the significant idiosyncratic features characterising the financial effects of ESG matters.

Suggested Citation

  • Alessi, Lucia & Giacomelli , Andrea, 2024. "Quantitative assessment of the financial materiality of climate physical risks: a case study," JRC Working Papers in Economics and Finance 2024-05, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202405
    as

    Download full text from publisher

    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC139793
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Riccardo Torelli & Federica Balluchi & Katia Furlotti, 2020. "The materiality assessment and stakeholder engagement: A content analysis of sustainability reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 470-484, March.
    2. Gourdel, Régis & Monasterolo, Irene & Dunz, Nepomuk & Mazzocchetti, Andrea & Parisi, Laura, 2024. "The double materiality of climate physical and transition risks in the euro area," Journal of Financial Stability, Elsevier, vol. 71(C).
    3. Simona Fiandrino & Alberto Tonelli & Alain Devalle, 2022. "Sustainability materiality research: a systematic literature review of methods, theories and academic themes," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 19(5), pages 665-695, September.
    4. Christian Nielsen, 2023. "ESG Reporting and Metrics: From Double Materiality to Key Performance Indicators," Sustainability, MDPI, vol. 15(24), pages 1-15, December.
    5. repec:eme:mfppss:eb018580 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacques, Pierre & Delannoy, Louis & Andrieu, Baptiste & Yilmaz, Devrim & Jeanmart, Hervé & Godin, Antoine, 2023. "Assessing the economic consequences of an energy transition through a biophysical stock-flow consistent model," Ecological Economics, Elsevier, vol. 209(C).
    2. Eugene Kang & Nguyen Bao Lam, 2023. "The impact of environmental disclosure on initial public offering underpricing: Sustainable development in Singapore," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(1), pages 119-133, January.
    3. António Pedro Vieira & Gregor Radonjič, 2020. "Disclosure of eco‐innovation activities in European large companies' sustainability reporting," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2240-2253, September.
    4. repec:ehu:cuader:55446 is not listed on IDEAS
    5. Klarissa Lueg & Rainer Lueg, 2021. "Deconstructing corporate sustainability narratives: A taxonomy for critical assessment of integrated reporting types," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(6), pages 1785-1800, November.
    6. Andrew S. Chang & Larissa S. Paramosa & Calista Y. Tsai, 2021. "Linking key topics to environmental indicators in corporate social responsibility reports of construction companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(4), pages 1335-1347, July.
    7. Stefania Veltri & Elena Cristiano & Olga Ferraro, 2023. "Examining the quality of the consolidated mandatory non‐financial statements of a cooperative banking group: A longitudinal analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1573-1587, July.
    8. Tian, Li & Wang, Qianyun, 2024. "Improving mineral mining enterprises environmental performance through corporate social responsibility practices in China: Implications for minerals policymaking," Resources Policy, Elsevier, vol. 88(C).
    9. Paolo Fedele & Silvia Iacuzzi & Andrea Garlatti & Rubens Pauluzzo, 2022. "L?evoluzione delle forme della rendicontazione: il bilancio di missione nelle organizzazioni sindacali," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2022(3), pages 349-372.
    10. Ghosh, Saibal, 2023. "Does climate legislation matter for bank lending? Evidence from MENA countries," Ecological Economics, Elsevier, vol. 212(C).
    11. Mariappanadar, Sugumar & Maurer, Iris & Kramar, Robin & Muller-Camen, Michael, 2022. "Is it a sententious claim? An examination of the quality of occupational health, safety and well-being disclosures in global reporting initiative reports across industries and countries," International Business Review, Elsevier, vol. 31(2).
    12. Martinez-Valencia, Lina & Garcia-Perez, Manuel & Wolcott, Michael P., 2021. "Supply chain configuration of sustainable aviation fuel: Review, challenges, and pathways for including environmental and social benefits," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    13. Wafa Ghardallou, 2022. "Corporate Sustainability and Firm Performance: The Moderating Role of CEO Education and Tenure," Sustainability, MDPI, vol. 14(6), pages 1-16, March.
    14. Rita Wijayanti & Doddy Setiawan, 2022. "Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance," Sustainability, MDPI, vol. 14(17), pages 1-25, September.
    15. Roberto Aprile & David Alexander & Federica Doni, 2023. "Enhancing the materiality principle in integrated reporting by adopting the General Systems Theory," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2219-2233, September.
    16. Dina Lucia Todaro & Riccardo Torelli, 2024. "From greenwashing to ESG‐washing: A focus on the circular economy field," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4034-4046, September.
    17. Paula Gomes dos Santos & Fábio Albuquerque & Maria Albertina Barreiro Rodrigues & Ana Isabel Morais, 2022. "The Views of Stakeholders on Mandatory or Voluntary Use of a Simplified Standard on Non-Financial Information for SMEs in the European Union," Sustainability, MDPI, vol. 14(5), pages 1-22, February.
    18. Bianca Alves Almeida Machado & Lívia Cristina Pinto Dias & Alberto Fonseca, 2021. "Transparency of materiality analysis in GRI‐based sustainability reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(2), pages 570-580, March.
    19. Massimiliano Celli & Simona Arduini & Tommaso Beck, 2024. "Corporate Sustainability Reporting Directive (CSRD) and His Future Application Scenario for Italian SMEs," International Journal of Business and Management, Canadian Center of Science and Education, vol. 19(4), pages 1-44, July.
    20. Bhavna Thawani & Tushar Panigrahi & Meena Bhatia, 2024. "Eleven years of integrated reporting: a bibliometric analysis," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(4), pages 666-684, December.
    21. Thomas A. Tsalis & Maria Terzaki & Dimitrios Koulouriotis & Konstantinos P. Tsagarakis & Ioannis E. Nikolaou, 2023. "The nexus of United Nations' 2030 Agenda and corporate sustainability reports," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(2), pages 784-796, April.

    More about this item

    Keywords

    Sustainability reporting standards; double materiality assessment; ESG sustainability report; environmental sustainability; ESG risk management; climate physical risk; idiosyncratic forward-looking information;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jrs:wpaper:202405. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Benczur (email available below). General contact details of provider: https://edirc.repec.org/data/ipjrces.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.