Corporate Sustainability: First Evidence on Materiality
We find that firms with strong ratings on material sustainability issues have better future performance than firms with inferior ratings on the same issues. In contrast, firms with strong ratings on immaterial issues do not outperform firms with poor ratings on these issues. Finally, firms with strong ratings on material issues and concurrently poor ratings on immaterial issues have the best future performance. Collectively these results are consistent with materiality guidance being helpful in improving the informativeness of ESG data for investors.