“Sesquimateriality?” A conceptual leap for the ISSB
Here’s the post that started it all. It’s a simple idea. Companies that seek to maximize their own value by externalizing costs (i.e., to get a free lunch) have a conflict of interest with their own shareholders, who are generally diversified and end up picking up the tab, when those externalized costs weigh down the economy and, consequently, the long term value of diversified portfolios. #sesquimateriality addresses this conflict by expanding the defintion of materiality to include not just information about how a company’s activities impact its own value, but also how they impact the value of other companies that its investors are likely to own. With this information, shareholders can use their governance rights (like voting on directors and shareholder proposals) to insist that the companies they own stop engaging in such destructive behavior.
Why the tongue-twister name? Check out the post! (Hint: the big debate in sustainability disclosure land is between single and double materiality.)