On October 7, 2024, a seminar titled "Sustainable Transition: Materiality and Positioning" was held at the Faculty of Economics at the University of Sapienza in Rome. Organized as part of the Picturing the Financial System seminar series, the event featured Jenny Daniela Salazar Zapata, PhD and founder of Regg3.

During the seminar, a comprehensive view was provided on how sustainability is transforming the financial system, focusing on one of the most crucial themes in analytical activities: double materiality.

This approach is essential for evaluating the risks and opportunities related to ESG (Environmental, Social, and Governance) factors, emphasizing the importance of integrating both economic considerations and environmental and social impacts into business strategies.

Double Materiality is divided into Financial Materiality and Impact Materiality.

• Financial Materiality refers to the outside-in perspective, where an ESG issue becomes financially relevant if it creates risks or opportunities that affect a company’s future cash flows and, consequently, its value in the short, medium, or long term.

The analysis of Financial Materiality aims to assess ESG risks that can directly impact the business model. The main framework used for this is the SASB (Sustainability Accounting Standards Board), which maps the ESG factors most financially relevant for different economic sectors.

• Impact Materiality, on the other hand, adopts an inside-out perspective. In this case, an ESG issue is considered material if the company generates significant, actual, or potential impacts on people or the environment. This includes not only the direct impacts caused by the company but also those linked to the upstream and downstream value chain.

Impact Materiality is closely linked to the Sustainable Development Goals (SDGs) and the Well-being, Equity, and Sustainability (BES) framework, providing a tool to measure company performance in terms of its positive or negative contributions to social and environmental contexts.

The seminar highlighted the increasing importance of Double Materiality for companies and investors operating in a sustainable transition context. While Financial Materiality focuses on the economic impacts of ESG risks, Impact Materiality emphasizes the corporate responsibility towards society and the environment. This dual approach represents a shift, where companies must not only protect their economic value but also contribute positively to collective well-being and the sustainability of the planet.

The seminar left participants with a clear vision: the future of the financial system will depend on companies’ ability to integrate these two dimensions of materiality, creating value not only for shareholders but for all stakeholders.