未来能源研究所-分解气候相关金融风险的双重重要性 Decomposing the Double Materiality of Climate-Related Financial Risk

DecomposingtheDouble

MaterialityofClimate-RelatedFinancialRisk

KevinStiroh

WorkingPaper26-09June2026

ResourcesfortheFuturei

AbouttheAuthor

KevinStirohisaseniorfellowatResourcesfortheFuture(RFF)andthedirectorof

Climate-relatedFinancialandMacroeconomicRiskInitiative,aresearchcollaborationbetweenHarvardUniversityandRFF.Previously,Stirohwasasenioradvisorinthe

DivisionofSupervisionandRegulationattheBoardofGovernorsoftheFederal

ReserveSystem,wherehedesignedandledtheFed’smicroprudentialapproachtothefinancialrisksofclimatechange.HealsoservedascochairoftheBaselCommitteeonBankingSupervision’sTaskForceonClimate-RelatedFinancialRisks.

Acknowledgements

IwouldliketothankMorganLewisforsubstantivediscussionsandcontributionstothispaperandRickAlexander,CoreyKlemmer,MartinaMenegat,PierreMonnin,TimRawlings,DanSufranski,andMargaretWallsforhelpfulcommentsonanearlierdraft.

AboutRFF

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Washington,DC.Itsmissionistoimproveenvironmental,energy,andnaturalresourcedecisionsthroughimpartialeconomicresearchandpolicyengagement.RFFis

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ResourcesfortheFutureii

Abstract

Financialpolicydiscussionsrelatedtoprudentialpolicyand“doublemateriality”haveconsideredboththeimpactofclimatechangeonabankandtheimpactthatthe

bankhasonclimatechange.Thispaperpresentsanillustrativeframeworkwithasetofinternallyconsistentdefinitionsandlinkagestofacilitateproductivediscussions

forbanks,investors,andprudentialanddisclosurepolicymakers.Theframework

decomposesdoublematerialityintoseveralconceptuallydistinctlinkagesfromtheperspectiveofanindividualbank:theexogenousimpactofphysicalandtransition

risks,theimpactofthebank’sactivitiesonclimatechangeandresultingriskdrivers,feedbackeffectsfromthebank’sactivitiesonitsownrisks,andspillovereffectsto

otherfinancialinstitutionsorthebroadereconomy.Byprovidingcleardefinitionsandincorporatinginsightsfromthemacro-modelingliterature,thisframeworkcanhelppromotemoreproductivepolicydiscussions.

DecomposingtheDoubleMaterialityofClimate-RelatedFinancialRiskiii

Contents

1.Introduction1

2.OverviewofDoubleMateriality1

2.1.OfficialSectorPerspectives1

2.2.AcademicandIndustryPerspectives3

2.2.1.Rationale3

2.2.2.CostsandBenefits3

2.2.3.PracticalApplications4

3.DoubleMaterialityFramework4

3.1.DefiningMaterialityLinkages4

3.2.DetailedDescriptionofLinkages7

3.2.1.Arrow(1):ExogenousPhysicalandTransitionRiskstoaBank8

3.2.2.Arrow(2):ImpactofaBank’sActivitiesonClimateChangeand

ResultingPhysicalandTransitionRiskDrivers9

3.2.3.Arrow(3):FeedbackEffectsfromaBank’sClimate-Impacting

ActivitiesonItsOwnPhysicalandTransitionRisks10

3.2.4.Arrow(4):FinancialSpilloverEffectsfromaBank’sClimate-

ImpactingActivitiesonthePhysicalandTransitionRiskofOtherFinancial

Institutions11

3.2.5.Arrow(5):Non-FinancialSpilloverEffectsfromaBank’sClimate-

ImpactingActivitiesontheBroaderEconomyandSociety12

3.3.DefiningtheComponentsofDoubleMateriality12

3.4.DefiningDoubleMaterialityfromaPolicyPerspective14

3.5.Challenges16

4.Conclusions18

References19

DecomposingtheDoubleMaterialityofClimate-RelatedFinancialRisk1

1.Introduction

Materialityistraditionallyanaccountingprinciplethatguidesthedisclosureof

information,whichisconsideredmaterialifitislikelytoimpactareasonableinvestor’sdecision-making.Materialityisalsoaconceptappliedintheprudentialcontext,wherearisktoasupervisedbankisconsideredmaterialifitislargeenoughtoimpactitssafetyandsoundnessorfinancialcondition

1

Microprudentialsupervisorsworktoensurethatsupervisedinstitutionsidentify,monitor,measure,andmanageallmaterialrisks,whilemacroprudentialsupervisorsfocusonmaterialriskstothestabilityofthebroader

financialsystem.

Inthecontextofclimate-relatedfinancialrisks,materialityhastakenonanadditional

meaning,whichhasbeendebated.TheEuropeanCommission(2019)introduced

“doublemateriality”asthecombinationof“financialmateriality,”definedastheimpactofclimatechangeonacompany,and“environmentalandsocialmateriality,”definedastheimpactofacompanyontheclimate,andsubsequentlyrequireddisclosureforboth(2022a,2022b,2025a,2025b).Thisbroaderframingisusefulforcertainpurposes,butitalsohasthepotentialtocreateconfusionindiscussionsofclimatechangebyfinancialmarketparticipantsandpolicymakers,particularlyasthefocusshiftsfromdisclosuretoprudentialpurposes.

Thispaperprovidesaframeworkthatincludesinternallyconsistentdefinitions,linkages,andexamplesofdoublematerialityanddecomposesdoublematerialityintoseveral

conceptuallydistinctlinkagesfromtheperspectiveofanindividualbank:theexogenousimpactofphysicalandtransitionrisks,theimpactofthebank’sactivitiesonclimate

changeandresultingriskdrivers,feedbackeffectsfromthebank’sactivitiesonitsownrisks,andspillovereffectstootherfinancialinstitutionsorthebroadereconomy.To

developtheseconnections,thepaperincorporatesinsightsfromthemacro-modelingliterature,whichhavebeenlargelyabsentfromdiscussionsofdoublemateriality.

Thisframeworkcanhelpclarifydiscussionsacrossjurisdictionswithdifferentmandatesandobjectives.Forexample,theobjectivesofmicroprudential,macroprudential,and

securitiesregulatorsmaydifferandarelikelynarrowerthantheobjectivesofaclimatepolicymakerfocusedonclimatemitigationoradaptation.Bybeingclearaboutobjectivesandterms,policymakerscanfocusontheareasmostrelevantfortheirrespective

mandatesandresponsibilitiestodevelopmoreeffectivepolicy.

2.OverviewofDoubleMateriality

2.1.OfficialSectorPerspectives

ThedoublematerialityapproachwasintroducedbytheEuropeanCommission(2019)

whendiscussingtheNon-FinancialReportingDirective(2017).

2

Itwassubsequently

embeddedintheCorporateSustainabilityReportingDirective,adoptedonNovember10,

1Forexample,theFederalReserveBoard(2026)issuedoperatingprinciplesthatprioritize“materialfinancialrisks.”

2SeeDeCristofaroandGulluscio(2023)andEuropeanCommissionStaff(2025)foradetailedhistoryofdoublematerialityreportingintheEuropeancontext.

ResourcesfortheFuture2

2022(EuropeanCommission2022a).TheEuropeanCommissionstatesthat

“companieshavetoreportnotonlyonhowsustainabilityissuesmightcreatefinancialrisksforthecompany(financialmateriality),butalsoonthecompany’sownimpactsonpeopleandtheenvironment(impactmateriality)”(2022b).Thelegislativetextisasfollows:

“ThoseArticlesthereforerequireundertakingstoreportboth

ontheimpactsoftheactivitiesoftheundertakingonpeople

andtheenvironment,andonhowsustainabilitymattersaffecttheundertaking.Thatisreferredtoasthedoublematerialityperspective,inwhichtheriskstotheundertakingandthe

impactsoftheundertakingeachrepresentonemateriality

perspective.”

—EuropeanCommission(2022a,para.29)

ThisapproachwasrecentlyconfirmedbytheEuropeanCommission(2025a,2025b)anddiscussedbyEuropeanCommissionStaff(2025).

TheEuropeanBankingAuthority(EBA)(2021,2022)approacheddoublemateriality

fromaprudentialperspectiveanddescribedtheconceptusingalternativeterminology:

Financialmaterialityisan“outside-in”perspective,whileimpactmateriality(or

environmentalandsocialmateriality)isan“inside-out”perspective.Forconsistency,thispaperusestheterms“financialmateriality”and“impactmateriality”throughout.

Itishelpfultobepreciseaboutwhyimpactmaterialitymightberelevantfordifferentstakeholders.Impactmaterialitycanreflectinterestintheclimateitselfforbroad

societalgoals,suchaspromotingatransitiontoalow-carboneconomyorajust

transition,thatarerelevantforgovernmentsorclimatepolicymakers(UNCDP2023).Inothercases,impactmaterialitymaybecomefinanciallymaterialforafinancial

institution,whichmightberelevantandwithinthemandateofprudentialauthoritiesinterestedinthesafetyandsoundnessofthefinancialinstitutionsorsecurities

regulatorsinterestedindisclosure.

TheEuropeanCommission(2019,6–7)highlightstheneedsofbothstakeholders

interestedintheimpactofacompanyandinvestorsinterestedinunderstandingthe

climateimpactoftheirportfolios,concludingthatthefinancialandimpactmaterialityperspectivesoverlapinsomecasesandarelikelytoincreasinglyoverlapinthefuture.Asmarketsandpublicpoliciesevolve,acompany’simpactontheclimatewillcreate

opportunitiesandrisksthatarefinanciallymaterial.Similarly,EBA(2021,32)asserts

thattheinside-outperspectivecanbecomerelevantforevaluatingriskswhenitbothaggravatestheimpactsfromtheoutside-inperspectiveandhasanegativeimpactonthecounterpartyitself.EBA(2022,17)statesthatarisk-sensitiveprudentialframeworkshouldaccountforbothfinancialandimpactmaterialityperspectivestotheextent

thattheyaffecttheinstitution’scredit,market,andoperationalrisks.

DecomposingtheDoubleMaterialityofClimate-RelatedFinancialRisk3

TheUSSecuritiesandExchangeCommission(SEC)(2024,18)usesmaterialitytorefertoinformationthatisrelevantforinvestmentandvotingdecisionsaboutacompany

andexplicitlyexcludesamotivationrelatedtotheimportanceoftheinformationtoclimate-relatedissuesoutsideofthosedecisions.Thusitgenerallyfollowsasinglematerialityapproach.TheSECsubsequentlyendeditsdefenseoftheclimate

disclosurerule(2025).

Similarly,theFederalReserveimplicitlytakesasinglematerialityperspectiveinitsprudentialsupervision.Forexample,ChairJeromePowell(2023)emphasizesthe

FederalReserve’simportant,butnarrow,responsibilitiesforclimate-relatedfinancialrisksandnotesthattheFederalReservefocusesonprudentandappropriaterisk

management,notoneffortstoaddressclimatechangethataremoreappropriateforelectedofficialsandclimatepolicymakers.

2.2.AcademicandIndustryPerspectives

Agrowingbodyofliteraturehaslookedattheconceptofdoublematerialityfroma

varietyofperspectives,includingassessmentsoftherationale,costsandbenefits,andpracticalapplications.Sections2.2.1–2.2.3provideanonexhaustivereviewofrelevantpapers.

2.2.1.Rationale

Gourdeletal.(2024)usealarge-scalemodeltoconcludethatbothcomponentsareempiricallyrelevanttoassessingtheimpactofdoublematerialityfromaprudential

perspective.MähönenandPalea(2024)provideabroaderapproachbasedonthe

politicalconstitutionoftheEuropeanUnion,suchasthelinkbetweencorporate

sustainabilityreportingandsocietalgoalsaroundsustainabledevelopment.Oman

andSvartzman(2021)putdoublematerialityintoabroaderdiscussionofsustainablefinanceandconsidertheimpactonotherpolicyperspectives,suchasfiscal/monetarycoordinationandsustainablefinance.Robinsetal.(2021)implicitlyadoptadouble

materialityperspectiveandconcludethatnet-zerostrategiesareessentialfor

financialstability.TheGlobalReportingInitiative(GRI)(2024)describesthepotentialconnectionsbetweenthetwocomponentsofdoublemateriality.

2.2.2.CostsandBenefits

Adamsetal.(2021)discussthebenefits(e.g.,greatershareholderengagement,morediverseviews,deepersocietalunderstanding,positivesignalstoinvestors)andthe

challenges(e.g.,disclosure,variationinapproach,organizationalcapacity,focuson

short-runoutcomes,andlackofassurance)ofadoublematerialityapproach.Täger

(2021)considersadditionalbenefitsofdoublemateriality,suchassmoothermarket

dynamicswheninvestorsarebetterinformedandmoreinformedcorporatedecisions.Boissinotetal.(2022)providethreeperspectivesforadoublematerialityapproach—idiosyncraticrisk,systemicrisk,andtransformative—eachwithadifferentsetofpolicyimplicationsandchallenges.

ResourcesfortheFuture4

2.2.3.PracticalApplications

Applebaumetal.(2023)discusstheroleofauditorsinevaluatingtheaccuracyofdoublematerialityreporting.DeCristofaroandGulluscio(2023)provideasummaryofthe

evolutionofdoublematerialityinEuropeandnoteonly“traces”ofdoublemateriality

reportingbycorporations.Correa-Mejiaetal.(2024)findthatapproximatelytwo-thirdsofEuropeancorporationsclaimingtoapplydoublematerialitydonotactuallycomplywithproposedguidelines.VanderLugtetal.(2025)reportthatabouthalfofover4,500companiessaytheirapproachisbasedondoublemateriality.

3.DoubleMaterialityFramework

Thissectionpresentsadoublematerialityframeworkthatfocusesonidentifying

caseswhereaparticularbank’simpactmaterialitybecomesfinanciallymaterialforitselforforotherfinancialinstitutionsinawaythatisrelevantformicroprudentialormacroprudentialauthorities.

3.1.DefiningMaterialityLinkages

Todefinematerialitylinkages,thepointofdepartureistheEuropeanCommission’s

framework(2019),showninFigure1.Inthisapproach,“financialmateriality”describes

howclimatechangecanimpactacompany,while“environmentalandsocialmateriality”(orimpactmateriality)describeshowthecompanycanimpacttheclimate.Agoalofthisframeworkistobemorepreciseaboutthecasesinwhichactionsthathaveanimpact

ontheclimatecanbecomefinanciallymaterial,indicatedbythedottedarrowinthemiddleofFigure1.

Figure1.EuropeanCommissionDoubleMaterialityPerspective

Source:ReproducedfromtheEuropeanUnion’s

GuidelinesonReportingClimate-Related

Information

(EuropeanCommission2019,7).

DecomposingtheDoubleMaterialityofClimate-RelatedFinancialRisk5

Figure2furtherdecomposesthissetupintoasetofpotentiallinkagesfromthe

specificperspectiveofanindividualbanktofacilitateadeeperunderstandingoftheserelationships.Eacharrowreflectseitheranimpactonthatbankortheimpactofthatbank’sactivitiesonotherpartsoftheeconomyandthefinancialsector.

Figure2.DetailedDoubleMaterialityPerspectiveforaParticularBank

Theselinkagescanbedefinedasfollows:

•Arrow(1):exogenousphysicalandtransitionriskstoabank,suchasahigherprobabilityofloandefaultsfrommortgagesinafloodzone

•Arrow(2):impactofabank’sactivitiesonclimatechangeandtheresultingriskdrivers,suchaslendingtoafossilfuelproducerthatincreasesgreenhousegas(GHG)emissionsorarenewableenergydeveloperthatreducesthem,which

ultimatelyhaveanimpactonphysicalhazards

•Arrow(3):feedbackeffectsfromabank’sclimate-impactingactivitiesonitsown

physicalandtransitionrisks

•Arrow(4):financialspillovereffectsfromabank’sclimate-impactingactivitiesonthephysicalandtransitionrisksofotherfinancialinstitutions,suchastheincrementalrisk

•Arrow(5):nonfinancialspillovereffectsfromabank’sclimate-impactingactivitiesonthebroadereconomyorsociety

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Figure2incorporatesseveralpresentationchoicesthatallowprudentialpolicymakerstofocusonthemostrelevantportionsofthedoublematerialitydiscussion.First,

thefigurehighlightstheimpacttoandfromaparticularbank.Inreality,allthese

actorshaveinterlinkagesandfeedbackeffects,sotherewouldbecausalconnections(“arrows”)betweenallactors(e.g.,thebroadfinancialsectorimpactsthereal

economy).Thatgeneralequilibriumperspectiveiscriticalfromanempiricaland

modelingperspective,andthereisalargeandgrowingliterature,3butitcanobscuretheconceptualdefinitionsembeddedindoublematerialitydiscussionsthatarethefocusofthispaper.

Second,thearrowsshowthedirectionofcausalimpactbutnotnecessarilythesign

oftheimpact.Forexample,abank’sfinancingoffossilfuelsmightcontributetoGHGemissions,whileabank’sfinancingofcarboncapturetechnologymightoffsetthem.

Battistonetal.(2021)refertothisasthepotential“enabling”or“hampering”roleof

thefinancialsystem.Thekeypointisthatabank’sactivitiescanhaveanimpacton

changesintheclimate,whichthenimpactsitselforotheractorsinthefinancialsector,realeconomy,orsociety.Theseimpactscanbequitecomplexandincorporatedifferentmechanisms;forexample,financingnewtechnologiescouldhavecompounding

benefitsduetoincreasingscale.

Third,eacharrowreflectsthecumulativeimpactofmultipleforces.Forexample,theexogenousimpactonabankisacombinationofphysicalandtransitionriskdrivers

thatabankfaces,whichcouldmanifestasdifferentrisksoropportunitiesforbanks

withdifferentgeographicfootprints,sectoralexposures,orbusinessmodels.Some

bankswithaspecificgeographicfootprintmightbemostexposedtophysicalrisks,whileotherbankswithdifferentbusinessmodelswouldbeexposedtotransitionrisks.

Finally,Figure2breaksoutthebank’simpactonclimatechangeandresultantriskdrivers(arrow(2))fromthefinancialimpactonitself,otherfinancialinstitutions,

andeconomyandsociety(arrows(3),(4),and(5)).Thesearecloselylinked,andthe

3Acompletegeneralequilibriumframeworkwouldrequireeitherintegratedassessmentmodelsthatcombinethesocioeconomicsystem,includingclimatepolicies,andthenatu-ralsystems(vanBeeketal.2024)oralternativeapproachesfocusedontheendogenousimpactoffinancingdecisionsandclimateoutcomes(Battistonetal.2021;Kreibiehletal.2022).Thegrowingliteratureonthelinksamongtherealeconomy,thefinancialsector,andclimateriskdriversshowsthecomplexityoftheseconnections,includingfeedbackeffectsandcompoundrisks(Battistonetal.2017;Battistonetal.2021;Acharyaetal.

2023;HiebertandMonnin2025);thespecificfeaturesofclimatepoliciesthatimpact

outcomesandincidence(Allenetal.2020;Carattinietal.2023;Giovanardietal.2023;

DöttlingandRola-Janicka2025;Annicchiaricoetal.2023;FrankovicandKolb2024;

GiovanardiandKaldor2024);thepaceofpolicychangeandtimingofimpact(Carattinietal.2024;KaldorfandRottner2024);andtheheterogeneousimpactsofpolicies(Baueretal.2023;Bertholdetal.2024;Jungetal.2024).Inaddition,thelarge-scalescenario

analysisperformedbycentralbankshavegenerallytreatedclimatechangeasexoge-

nousanddonotincludefeedbackeffectswithintheeconomyandthefinancialsector

(e.g.,BoE2022;EBAetal.2024;FederalReserveBoard2024).TheNetworkforGreen-

ingtheFinancialSystem(NGFS)(2024a)describeshowmacroeconomiceffectscan

propagatethroughthefinancialsystem,andAllenetal.(2020)andBattistonetal.(2021)showthatincorporatingthefullsetoffeedbackeconomiceffectsisanimportant,but

enormouslycomplex,exercise.

DecomposingtheDoubleMaterialityofClimate-RelatedFinancialRisk7

separationismeanttoemphasizethatsomeimpactsonclimatechangeandresultantriskdriversmightnotbefinanciallymaterial.Forexample,anincreaseinthefrequencyandseverityofhurricanesinaparticularregionmaynotbefinanciallymaterialfora

bankwithnoexposurethere.

3.2.DetailedDescriptionofLinkages

Thissectionconsiderseachofthesearrowsinmoredetailandprovidesexamples

andevidencefromthemacro-modelingliteratureonpotentialimpacts.Theseare

indicativeexamplestoshowdifferenttransmissionmechanismsandarenotintendedtobecomprehensive.ResultsaresummarizedinTable1anddiscussedinmoredetailinSections3.2.1–3.2.5.

Table1.SummaryofPotentialLinkagesinDetailedDoubleMaterialityPerspective

Impact

Examples

(1)Exogenousphysicalandtransitionrisktoabank

Physicalrisk

•Physicaldamage,reductioninborrowercashflowsadaptationcosts→changeinvalueofbankassetsandcollateral;fee-basedincome→creditrisk;asset

repricing→marketrisk

•Bankadaptationcostsraisecoststobank→strategicrisk

•Disruptionofbankoperations→operationalrisk

Transitionrisk

•Changeinvalueofbankassetsorcollateral→creditrisk,marketrisk

•Corporatefunding/drawdowns→liquidityrisk

•Changeinpolicy,misalignedbusinessmodels→strategicrisk,reputationrisk

•Mitigationrequirementsincreasecoststobanks→strategicrisk,operationalrisk

(2)Impactofabank’sactivitiesonclimate

changeandresultingphysicalandtransitionriskdrivers

Physicalrisk

•Financingactivity,e.g.,Scope3,GHGlending,renewableenergy→emissions→physicalhazards

•Bankoperations(Scope1and2)→emissions→physicalhazards

Transitionrisk

•Financingactivity,e.g.,Scope3,GHGlending,renewableenergy→policy,technology,sentiment

•Publicactions,e.g.,disclosures/net-zerocommitments/lobbying→policy,sentiment

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(3)Feedbackeffects

Incrementalphysicalriskandtransitionriskin(1)forthebank

fromabank’sclimate-

impactingactivitieson

itsownphysicaland

Incrementaltransitionrisks

•Investor/climate/depositorpullback→reputationrisk,liquidityrisk,strategicrisk

transitionrisks

•Legal/litigationcostsorchangesinlegislation→operationalrisk

Incrementalphysicalriskandtransitionrisk(1)forotherfinancialfirms

(4)Financialspillovereffectsfromabank’sclimate-impacting

activitiesonthe

physicalandtransition

Financialstabilityeffects

•Spilloversfromexposurereduction,e.g.,lendingpullback→homeprices

•Feedbackloops,e.g.,lossesfromphysicalevent→higherleverage→reducedlending

riskofotherfinancialinstitutions

•Opacity,mispricing,anduncertainty,e.g.,physicaleventorpolicyshift→abruptrepricingofassets/firesalesorhigherriskpremiums/reducedfinancing

•Commonshocksamplifyfinancialimpact

(5)Nonfinancial

spillovereffectsfrom

abank’sclimate-

impactingactivitiesonthebroadereconomyorsociety

Incrementalphysicalandtransitionriskdriversthatdrivenonfinancialoutcomes,e.g.,agricultureorlaborproductivity,mortality,migration,sectoral/