Materiality assessment process

The materiality assessment process is the foundation of CLP’s best practice sustainability management and reporting, enabling it to integrate sustainability into its business strategy and create long-term value for stakeholders.

Overview of the assessment approach

A materiality assessment helps to contextualise sustainability-related impacts, risks and opportunities, and decide how these should be disclosed in CLP's reports. By combining both internal and external stakeholder views with extensive megatrend analysis, CLP determines the sustainability material topics that are most financially material to its business and to stakeholders from an impact perspective.

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

Global standards for best practice in assessing materiality have continued to evolve in line with broader changes in sustainability disclosure standards. Most notable are the new standards, IFRS S1 and IFRS S2, published by the International Sustainability Standards Board (ISSB) in June 2023, which provide additional clarity on how to assess financial materiality. Similarly, the GRI Sustainability Reporting Standards upgraded the materiality assessment methodology in 2021.

In 2023, CLP considered the latest best practice advice from standard setters, including the following, amongst others:

  • The ISSB's IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, published in June 2023;

  • GRI 3: Material Topics 2021; and


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 proactively embraced the concept of double materiality to support its sustainability risk management and to inform the sustainability-related content of its annual suite of reports. This approach means that CLP’s Annual Report covers financially material sustainability topics that could reasonably be expected to affect the Company’s prospects, while the Sustainability Report includes sustainability topics that have a material impact on people, the environment and the economy.

In 2023, CLP continued to identify and assess potential sustainability impacts, risks and opportunities, and further align its reporting with the IFRS S1 standard. Its assessment process enables CLP to identify areas of material topic, and to understand how sustainability-related risks and opportunities can be integrated into the Group’s strategic planning and risk management processes.

Double materiality approach

The double materiality approach has streamlined the disclosures in the Annual Report and Sustainability Report. The sustainability agenda and associated CLP responses are summarised in The Materiality Matrix section of this report and the Delivering Our Sustainability Agenda chapter of the Annual Report. 

Read more in the Delivering Our Sustainability Agenda chapter in CLP's 2023 Annual ReportRead more in the Overview of Delivering Our Sustainability Agenda chapter in CLP's 2023 Annual ReportRead more in the Our sustainability agenda sectionRead more in the Materiality matrix section

The double materiality assessment cycle

While CLP's methodology has continuously evolved to reflect changes in best practices, the material topics 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 topics relevant to CLP are unlikely to change within a short to medium timeframe.

CLP implements the double materiality assessment process based on a three-year cycle. Each year, there are variations in the breadth and scope of the assessment process, with Year 1 involving a comprehensive assessment and Years 2 and 3 focusing on revalidation and the incorporation of incremental changes with reduced time requirements.


The assessment process in 2023

GRI reference: 2-12, 3-1

In 2023, CLP undertook the Year 3 assessment approach. For the first time, CLP has appointed a non-financial auditor to perform limited assurance over its materiality assessment process in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information. By setting an example, CLP demonstrates its commitment to transparency and accountability in its materiality assessment process and ensures the integrity and credibility of its sustainability reporting. 

Conduct 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 2023, CLP reviewed its earlier megatrend analysis through management interview and confirmed that the nine megatrends identified in 2021 remain relevant to CLP and its underlying strategic objectives.

In relation to these megatrends, senior management from various Group functions and Business Units were interviewed in 2023. The interviews explored the strengths, weaknesses, opportunities, and threats associated with each identified megatrend. 

In addition, CLP reviewed its risk registers, internal strategy papers, company policies, and international reporting standards to help it identify impacts, risk and opportunities conceivably material to CLP’s current and future prospects. The process undertaken was evidence-based.

The megatrends impacting CLP
Identify impacts, risks and opportunities

To identify sustainability-related impacts, risks and opportunities (IROs), CLP conducted a comprehensive analysis of various internal and external sources. These included CLP strategy and risk documentation, interviews collating views from a broad range of internal stakeholders from CLP’s middle and senior management, a review on megatrends to reflect CLP’s current operating context, and a review of the latest reporting standards. CLP identified a total of 69 IROs, and grouped them under the nine megatrends most likely to affect CLP’s current business and operating environment.

‘Impact materiality’ refers to significant positive or negative impacts on people, the economy and the environment, including impacts on human rights, based on the GRI definition. ‘Financial materiality’ refers to sustainability-related risks or opportunities that could reasonably be expected to affect the Group’s cash flows, access to finance or cost of capital in the short, medium and long term, as per the IFRS S1 standard. Sustainability-related financial disclosure refers to disclosing material information about these risks and opportunities to investors. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence investment decisions.

Assess and validate impacts, risks and opportunities

CLP continued to apply the assessment methodology by considering the severity and likelihood of risk, and the benefit and likelihood of opportunities. Each impact, risk and opportunity was assessed as either negative or positive, actual or potential (based on the latest GRI 3: Material Topics 2021 guidance). In 2023, additional considerations such as time horizon (short-term, medium-term and long-term) and position in the value chain (upstream, own operation and downstream) were introduced in accordance with the IFRS S1 standard. 

To finalise the assessment phase, the significance of each negative impact or financial risk was evaluated for its severity and likelihood. The methodology incorporated the latest GRI guidance, the ISO 31000 Risk Management Standard, and CLP’s existing Group Risk Management Framework. A similar methodology was devised to assess the significance of each positive impact and financial opportunity, considering the benefit and likelihood of each opportunity.

After evaluating for magnitude/severity and likelihood, 49 IROs were assessed as ‘High’ or ‘Extreme’ and therefore material. Among them, 26 were sustainability-related financial risks (18) and opportunities (8), and 23 were stakeholder impacts (10 negative, 13 positive). All material topics have both stakeholder impact and financial implications for the Group. The summary of prioritised sustainability-related impacts, risks and opportunities discloses 51 IROs with 49 high or extreme IROs, as well as 2 medium IROs.

It is important to note that CLP’s methodology for assessing sustainability-related materiality aligns with and informs future sustainability-related strategy and reporting. In addition, this materiality assessment and the risk management processes have been more closely integrated. CLP's risk management process takes into account the identified material topics which are determined through comprehensive annual materiality assessments.    

The assessment process was carried out by a working group of internal and external materiality experts, with participation from CLP’s Group Sustainability, Group Risk Management, Investor Relations and Corporate Affairs teams. The assessment outcomes were refined and validated by the Sustainability Executive Committee and endorsed by the CLP Holdings Sustainability Committee.


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