Understanding Impact and Financial Materiality under ESRS

The ESRS framework is based on double materiality, which comprises:

Impact Materiality – This relates to the organization’s potential positive or negative impacts on

people or the environment, irrespective of whether these impacts translate into financial effects​.

Financial Materiality – This refers to sustainability matters that affect the company's financial

position, including risks and opportunities that influence financial outcomes over the short, medium,

or long term​.

Why the other options are incorrect:

(A) False: A sustainability topic can be material even if it does not directly affect financial

performance; it may still be impact material​.

(D) False: Impact and financial materiality are equally important under ESRS. Neither is prioritized

over the other​.

(E) False: The ESRS process generally begins with impact materiality, not financial materiality​.

Reference:

Commission Delegated Regulation (EU) 2023/2772, Section 3.3 on Double Materiality​

EFRAG Materiality Guidance on ESRS, which provides methodologies for assessing impact and

financial materiality​