Materiality assessment process

The materiality assessment is the foundation of best practice sustainability management and ESG reporting. The assessment supports the integration of sustainability into CLP business strategy and its ongoing efforts to create long-term value for stakeholders.

The assessment process overview

At the same time a materiality assessment helps to contextualise ESG impacts and how these should be disclosed in its reports. By combining both internal and external stakeholder views with extensive megatrends analysis, CLP determines which ESG issues are most material to its business from a financial perspective and to stakeholders from an impact perspective.

GRI reference: 2-12, 3-1, 3-3

Global standards for best practice in assessing materiality continue to evolve in line with broader changes in ESG disclosure standards. For example, new guidance from the International Sustainability Standards Board (ISSB) is expected in 2023 and anticipated to provide additional clarity on how to assess financial materiality. Similarly, the GRI Sustainability Reporting Standards (GRI), which remains the most commonly used standard for sustainability reporting, upgraded its materiality assessment methodology in 2021.

In 2022, CLP considered the latest best practice advice from standard setters, including the following:

  • GRI 3: Material Topics 2021;

  • The International Financial Reporting Standards (IFRS) Foundation Sustainability Disclosure Standards;

  • Proposals for a Relevant and Dynamic EU Sustainability Reporting Standard-setting, published by the European Financial Reporting Advisory Group (EFRAG) in February 2021; and

  • Applying Enterprise Risk Management to Environment, Social and Governance-related Risk Guidelines, published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the WBCSD in October 2018.

In addition, external experts in materiality assessment were consulted via interviews. The expert group included global standards setters, investors and well-recognised governance and sustainability organisations.

Enhancing the double materiality approach

Since 2018, CLP’s materiality assessments consider how megatrends could impact the sustainability of the Company’s business strategy in the medium to long term. In 2021, CLP became an early adopter of double materiality to support its ESG risk management and to inform the ESG content of its annual suite of reports. This adoption sees CLP’s Annual Report cover financially material ESG topics that potentially create or erode enterprise value, while the Sustainability Report includes ESG topics that have a material impact on people, the environment and the economy.

In 2022, CLP further enhanced its double materiality assessment methodology with reference to the new GRI 3 guidance, albeit with a modified approach to incorporate a review of financial risks and opportunities. The methodology was developed to identify and assess potential ESG impacts, risks and opportunities, thereby operationalising an assessment via a standardised and repeatable approach. This assessment process helps CLP identify areas of priority, in particular how ESG risks and opportunities should be integrated into the Group’s strategic planning and risk management processes.

Download the GRI 3: Material Topics 2021

Double materiality approach


The double materiality approach streamlines the disclosures in the Annual Report and Sustainability Report. The material topics and associated CLP responses are summarised in The materiality matrix section of this report and the Sustainability as our business strategy section of the Annual Report. 

Read more in the Stakeholders section in CLP’s 2022 Annual ReportRead more in the Sustainability as Our Business Strategy section in CLP's 2022 Annual ReportRead more in the Our sustainability priorities sectionRead more in The materiality matrix section

The double materiality assessment cycle

While CLP's methodology has evolved year-on-year to reflect changes in best practice, the material issues identified since 2018 have remained relatively consistent, with only minor updates over the period. This reflects the reality that in the absence of material changes in the operating environment, material issues relevant to the utilities sector are unlikely to change over a short timeframe.

CLP implements the double materiality assessment process based on a three-year cycle. Variations in the breadth and scope of the assessment process occur year-on-year, with the Group undertaking a comprehensive assessment in Year 1 and less time-consuming assessments for revalidation and the incorporation of incremental changes in Years 2 and 3.

Three-year cycle of double materiality assessment framework

The assessment process in 2022

GRI reference: 2-12, 3-1

In 2022, CLP undertook the Year 2 assessment approach.  


Conduct desktop research and stakeholder interviews

Megatrends are large, transformative global forces that define the future by having a far-reaching impact on business, economies, industries, societies and individuals. In 2022, CLP conducted a review of prior megatrend analysis and validated that the nine megatrends identified in 2021 remain relevant to CLP and reflect CLP’s underlying strategic objectives. 

Interviewing stakeholders is a key step in any materiality process. CLP’s senior management from a wide range of disciplines was interviewed in 2021 (Year 1). In 2022, in line with the Year 2 assessment process, external materiality experts were interviewed to gauge their views on evolving best practice and how this aligns with CLP’s current approach to reporting.

In addition, CLP conducted megatrends analysis and reviewed its risk registers, internal strategy papers and company policies, and GRI and Sustainability Accounting Standards Board (SASB) guidance, to help identify impacts, risk and opportunities conceivably material to CLP’s current and future prospects.  The process undertaken is evidence-based.

The megatrends impacting CLP


Identify impacts, risks and opportunities

Applying the assessment process, in 2022 (Year 2) CLP identified over 80 potential stakeholder impacts and financial risks and opportunities.

‘Impact materiality’ refers to significant positive or negative impacts on people, the economy and the environment, including impacts on human rights, as per the GRI definition.

To integrate data-driven evidence as part of the materiality assessment process, in 2022 CLP introduced an artificial intelligence (AI)-driven tool to identify evidence of ESG risks and opportunities from relevant sources such as corporate reports, regulations, standards, news and social media.

‘Financial materiality’ refers to financial risks or opportunities which create, preserve or erode enterprise value, as per the International Sustainability Standards Board (ISSB) Exposure Drafts. These risks and opportunities are considered to have implications for the organisation’s revenues, expenses or balance sheet, which in turn means either a negative or positive and actual or potential impact on CLP’s stakeholders or enterprise value.

Assess and validate impacts, risks and opportunities

In 2022, CLP enhanced the assessment methodology by considering the severity and likelihood for risk, and the benefit and likelihood for opportunities. 

Each impact, risk and opportunity was assessed as either negative or positive, actual or potential (as per the latest GRI 3: Material Topics 2021 guidance).

In terms of ‘impact materiality’, over 15 risks and opportunities were judged as ‘high’ or ‘transformational’; none were classified as ‘extreme’. These were then arranged under broader sub-topics, and ultimately top-tier material topics. This alignment exercise resulted in a slightly revised number of top tier sub-topics (12) and top tier material topics (4) in 2022.

To finalise the assessment phase, the significance of each negative impact or financial risk was evaluated for its severity and likelihood. The methodology employed drew from the latest GRI guidance, ISO 31000 Risk Management Standard, and CLP’s Group Risk Management Framework.

A similar methodology was devised to assess the significance of each positive impact and financial opportunity, with each evaluated for its benefit and likelihood.

It must be noted that the methodology CLP employs to assess for sustainability-related materiality aligns with and supports CLP’s general approach to risk management.

The preliminary results of the Year 2 assessment were presented to CLP’s Sustainability Executive Committee and the Board-level Sustainability Committee. Both committees validated the findings identified by the working group. 


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