“Double materiality” (ESG) is integrated into the modern evaluation of investments by complementing traditional financial analysis with a systematic consideration of the impacts, both suffered and generated by the company.

Here are the detailed integration mechanisms:

1. Definition of Double Materiality

The investment decision is no longer limited to financial performance alone. It now integrates two complementary dimensions of materiality:

• Outside-In: It analyzes how the external environment (climate, society, regulation) impacts the financial performance of the company. This is the “simple” or accounting materiality.
• Inside-Out: It analyzes the impact of the company’s activities on the environment and society (CSR). This is the major novelty introduced in particular by standards such as the GRI (Global Reporting Initiative) and the European CSRD directive.

2. Integration into the project assessment process

The concrete integration of these dimensions into the financial evaluation (NPV calculation, IRR) requires the identification of the financial impacts of ESG factors:

• Sensitivity analysis as a pivotal tool: Sensitivity analysis makes it possible to identify which external elements (carbon regulation, social acceptability) have a sufficiently strong impact on profitability to be qualified as “material”.
• Monetization of externalities (The cost of CO2): The assessment now includes the cost of greenhouse gas emissions (Scopes 1, 2 and 3).
  • Companies must make a “total carbon footprint” of their decisions (e.g. choice of a distant vs. local supplier).
  • This balance sheet is “financialized” using the price of carbon allowances (carbon credits). For example, a supplier that is cheaper in terms of direct cost but emits a lot of CO2 can become more expensive if we include the price per tonne of carbon (around €65-100 depending on the period) that the company will potentially have to pay or compensate.

3. Dual Materiality Matrix and Stakeholders

Companies are building double materiality matrices to prioritize ESG issues. These matrices confront the vision of the company and that of the stakeholders, highlighting consensus and disagreement.

• Example: For transport infrastructures (such as an airport), the double materiality forces us to arbitrate between financial profitability (which would lead to an increase in airport taxes) and the territorial economic impact (which requires low costs to promote local development).

4. Limits and Risks (Greenwashing)

The sources point to a risk of accounting manipulation or “greenwashing” in the management of these indicators.

• Example of impact transfer: A company can improve its direct carbon footprint (Scope 1) by outsourcing polluting production. Emissions disappear from its Scope 1 to reappear in its Scope 3 (supplier emissions), without the real impact on the planet being reduced. Modern valuation must therefore monitor the entire value chain to avoid these biases.

In summary, double materiality transforms investment valuation by requiring the accounting of “hidden” costs (such as carbon) and the management of externality risks, no longer only for ethical reasons, but because they have become determinants of sustainable financial performance.