Determining Materiality

SASB’s Materiality Map™ creates a unique materiality profile for different industries. In order to comply with the SEC’s view of materiality, our approach is designed to provide a view into the information needs of the reasonable investor. The Map relies heavily on evidence of investor interest and evidence of financial impact, and it allows for adjustments based on financial impact and long-term sustainability principles. The quantitative model is designed to prioritize the issues that are most important within an industry, to keep the standards to a minimum set of issues that are likely to be material. Sustainability accounting standards are then developed based on both the quantitative results from the Map and a qualitative research process informed by SASB’s research team.



Sustainability Issues and Industries 


The Map looks at 40+ sustainability issues and analyzes their importance in the context of the 80+ industries in SICS.


Issues are classified under five categories: Environmental Capital, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance. Traditionally, sustainability issues are classified under the common ESG structure; however, SASB uses a finer grained analysis in order to surface potential impacts on the company’s ability to create long-term value.


The image below illustrates the set of sustainability issues and how they are grouped into the five broad categories:

ESG Univ of Issues 2

   (click image to enlarge)





How is the Map created?


The Materiality Map is based on tests designed to prioritize highly material issues on behalf of the “reasonable investor.” The Map relies heavily on two types of evidence:  evidence of interest by different types of stakeholders, and evidence of financial impact. A forward looking adjustment acknowledges emerging issues which are not yet reflected in the evidence-based tests.


The process is as follows:


1- Evidence of Interest (five-part test) – This type of evidence is collected by searching tens of thousands of source documents using keywords for each sustainability issue in order to arrive at a profile of the intensity with which issues arise in each industry. The five tests are associated with unique source documents –Form 10-Ks, legal news, CSR reports, shareholder resolutions, media reports and innovation journals. These documents help to capture the sustainability concerns of different stakeholders that the reasonable investor cares about and have the potential to impact corporate performance. SASB is currently evaluating the feasibility of including SEC comment letters in the source document search, to better understand issues of interest to the SEC in specific industries.


2- Evidence of Financial Impact – This type of evidence is collected by SASB’s research team during a 3-month qualitative research process for each sector, and further augmented over the course of the year-long development period. For the issues of interest, SASB evaluates whether there is current evidence that management (or mismanagement) of the issue will affect traditional corporate valuation parameters: i.e. profits (revenue and/or costs), assets and liabilities, and cost of capital. This evidence tilts the results of the five part test towards issues where there is also the potential for financial impact. We capture both anecdotal and quantitative studies as evidence of links to valuation.


3- Forward-Looking Impact – In a small number of cases, SASB may make an adjustment to an issue to raise its importance (where there is evidence of emerging interest) based upon traditional sustainability concepts: management or mismanagement of the issue may create positive or negative externalities that other stakeholders, industries, or generations will deal with; and/or there is the potential for systemic disruption. In any case, the impact of the issue must be reasonably likely to occur and of significant magnitude to be deemed material.

Universe of Issues - Filtered

 (click image to enlarge)


The adjustments to the map allow us to correct for the imperfect state of sustainability reporting, particularly in Form 10-Ks and CSR reports. Material sustainability issues are often not reported in Form 10-Ks, and CSR reports contain significant amounts of immaterial information. Additionally, the media tend to focus on one or two issues that capture or reflect stakeholder attention. In the future, with a better understanding of what issues are material and the evidence that supports them, we expect to see more convergence between the “evidence of interest” and “evidence of financial impact” tests, and fewer adjustments will be needed.



Powered by Bloomberg

The Materiality Map test automation, as well as the data those tests access, are powered by the Bloomberg Professional service. The following section demonstrates the magnitude and breadth of data SASB analyzes. The robust analytics and data sources provided by Bloomberg LP help make the Materiality Map possible.



Materiality Map by the Numbers


88 Industry Profiles
43 ESG issues tested
6 Types of source documents used for data collection(10Ks, legal news, CSR reports, general media articles, innovation news)
86 Sets of keywords with literally thousands of possible keyword combinations describing the ESG issues
12,500 U.S. publicly traded companies from which source documents are available
+45,000 “Evidence of interest” data points


The idea of the Materiality Map was first introduced by the Initiative for Responsible Investment at Harvard University in the white paper  “From Transparency to Performance: Industry Based Sustainability Reporting on Key Issues”. The Map that you see today is adapted from the evidence-based methods piloted in that study.


Click here to learn more about the SASB Materiality Map™