Financial Assessment
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      1. DMA
      2. Financial Assessment

      Financial Assessment: Capture

      In this process step, financial risks and opportunities associated with sustainability aspects are recorded.

      Financial materiality is viewed from an outside-in perspective, i.e. financial opportunities and risks are identified in connection with sustainability issues that have an impact on your company's business activities. They can influence the company's development in the short, medium and long term and have an impact, for example, on the financial position, financial performance, cash flow, access to finance or the cost of capital (ESRS 1.49). The aim of this process step is to identify and record the financial risks and opportunities of ESG topics.

      When you open the financial assessment for the first time, a pop-up window appears. There you can adjust your scales for assessing the severity levels to the values of your company-specific risk management. Please note that this is only possible once and cannot be changed afterwards. The assignment of the scale is further divided into three levels, “low”, “medium (case-by-case assessment)” and “ material”. In the second line, additional information on the monetary quantification should be provided in each case. This can be done in units of your choice. Examples are EUR, percentage turnover, costs and cash flow. After adjusting the scaling, click on the Save button and you can start with the actual financial assessment.  

      The following example of a scale adjustment illustrates how the pop-up window works. The lines and arrows highlighted in pink illustrate the possibility of individually modifying the materiality thresholds. In the turquoise lines and arrows, these thresholds are linked to financial values, which are displayed as the second line in the materiality scale after saving. In this example, the original standard scale of 1 to 10 has been adapted to a reduced scale of 1 to 6. This results in a value between 1 and 36 at the end of the evaluation instead of a range of 1 to 100.

      Note: The screenshot was created in the evaluation window and represents a later process step. At this point, it serves solely to illustrate and better understand the adjustment of the scales.

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      To do this, use the Add datapoint button to open the input field in which you first describe the opportunity or risk with a title. Click on the Save button and your opportunity/risk will appear in the list and you can continue entering further opportunities and risks. If you click on the title of the risk/opportunity, a new window will open in which you can enter further explanations and company-specific information.

      Risks and opportunities can be added, edited or removed at any time throughout the process using the delete icon. You can use the arrow function to move the rows up or down. You can also add associated files using the upload button. You also have a search function and various filter options to display specific content. 

      To navigate the site, you can use keywords in the search field to display the corresponding opportunities and risks. You can also filter and sort by column.

      At any point in the process, you can also download the current work status as a PDF or Excel file. To do this, click on the respective PDF or Excel button.

      The Continue button takes you to the next process step, the evaluation.

      Assistance

      A sustainability aspect is material from a financial point of view if it has a significant financial impact on the company or if this can be reasonably expected. 

      Risks and opportunities can arise from events in the past or in the future. The financial materiality of a sustainability aspect is not limited to aspects that fall under the control of the company, but also includes information on material risks and opportunities that are attributable to business relationships outside the scope of consolidation used in the preparation of the financial statements. (1)

      Dependencies on natural, human and social resources can be the cause of financial risks or opportunities. Dependencies can have two different effects:

      (a) they can affect the company's ability to continue to use or procure the resources required for its business processes, as well as the quality and prices of these resources, and
      b) they may affect the entity's ability to rely on the relationships necessary for its business processes on acceptable terms. (2)

      The impacts that have already been recorded often also result in financial risks or opportunities for the company. It is therefore helpful if you go through the list of recorded impacts and see whether you can formulate a suitable risk/opportunity for this. You can also use the value chain to help you identify further risks and opportunities along the upstream and downstream stages of the value chain, as well as in your own operations.

      The following questions can be helpful in identifying risks and opportunities:

      • What natural, human or social resources are we dependent on (e.g. raw materials, qualified employees*, relationships with companies, institutions, social representatives*)?
      • Are there any events that could lead to us no longer being able to procure these resources at an appropriate price and quality or at all?
      • Have there been events in the past from the environment, social groups or in the context of corporate governance that have had a short, medium or long-term impact on the company (e.g. financial position, liquidity, cash flows, access to finance, cost of capital, financial performance)?
      • Will there be such events in the future? (3)
      • What existing risks/opportunities can possibly be transferred from the existing risk management system and the company's financial statement?

      (ESRS 1.49, 1.50; IG Materiality Assessment Rn. 87, 89, 90, 157, 158)

      Sources:

      (1) Delegierte Verordnung (EU) 2023/2772, ESRS 1, Artikel 3.5, Abs. 49, https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=OJ%3AL_202302772
      (2) Delegierte Verordnung (EU) 2023/2772, ESRS 1, Artikel 3.5, Abs. 50, https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=OJ%3AL_202302772
      (3) Deutscher Nachhaltigkeitskodex (o. D.), IROs, https://www.deutscher-nachhaltigkeitskodex.de/media/4ijpazw4/dnk_iros-impacts-risks-and-opportunities.pdf