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.
CLP's materiality assessment helps to contextualise its sustainability-related impacts, risks and opportunities and determine how these should be disclosed in CLP reports. By combining both internal and external stakeholder views with extensive megatrend analysis, CLP is able to determines the sustainability material topics that are most financially material to its business and to stakeholders from an impact perspective.
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. The GRI Sustainability Reporting Standards also upgraded the materiality assessment methodology in 2021.
In 2024, 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;
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 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.
Double materiality approach
In 2024, CLP continued to identify and assess actual and potential sustainability impacts, risks and opportunities and further align its reporting with the IFRS S1 standard. Its assessment process enables CLP to identify material topics and to understand how sustainability-related risks and opportunities can be integrated into the Group’s strategic planning and risk management processes.
While CLP's methodology has continuously evolved to reflect changes in best practices, the materiality assessment has taken into account topics that are material to the Group in the short-, medium- and long-term.
Therefore, the material topics identified since 2018 have remained relatively consistent, with only minor updates over the period. 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 re-validation and the incorporation of incremental changes with reduced time requirements.
In 2024, CLP undertook the Year 1 assessment approach. This is a comprehensive assessment that includes megatrend analysis, peer review, research and stakeholder engagement to identify key sustainability-related impacts, risks and opportunities.
As an industry pioneer, CLP has appointed a non-financial auditor to provide 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. CLP is demonstrating its commitment to transparency and accountability in its materiality assessment process and ensuring the integrity and credibility of its sustainability reporting.
Conduct stakeholder interviews
Megatrends are large, transformative global forces that define the future and have a far-reaching impact on business, economies, industries, societies and individuals. In 2024, CLP conducted a comprehensive review of megatrends and presented the results in a megatrends paper. CLP also conducted interviews with the Group Executive Committee members and senior executives to assess which megatrends were most important to CLP’s prospects. A SWOT analysis for each megatrend has been undertaken. 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.
Identify, assess and validate impacts, risks and opportunities
To identify sustainability-related impacts, risks and opportunities (IROs), CLP undertook interviews to collate the views of 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. It identified a total of 89 IROs and grouped them under the nine megatrends most likely to affect CLP’s business and operating environment.
The Double materiality process in 2024
CLP continued to apply the assessment methodology by considering the severity and likelihood of risk and the benefit magnitude 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 2024, CLP continued to assess with considerations such as time horizon (short-term, medium-term and long-term) and position in the value chain (upstream, own operation and downstream) consistent 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 Standards, 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 magnitude and likelihood of each opportunity.
After evaluating for magnitude/severity and likelihood, 57 IROs were assessed as ‘High’ or ‘Extreme’ and therefore material. Of these, 35 were sustainability-related financial risks (24) and opportunities (11) and 22 were stakeholder impacts (14 negative, 8 positive). Five out of six material topics had a stakeholder impact and/or financial implications for the Group. The prioritised sustainability-related impacts, risks and opportunities have been summarised in CLP’s Sustainability Report and Annual Report respectively. The assessment outcomes have been refined and validated by the CLP Holding’s Sustainability Executive Committee and endorsed by the Sustainability Committee.
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.
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