Is "sustainability" material to the reasonable investor? Under the securities laws, publicly traded companies are required to disclose to their shareholders and the investing public "material" information about their company. In TSC Industries v. Northway, 426 U.S. 438 (1976), the U.S. Supreme Court defined "material information" as that which "presents a substantial likelihood that disclosure of the omitted fact would have been viewed by the ‘reasonable investor’ as significantly altering the ‘total mix’ of information made available."
In other words, material information is information that a reasonable investor would consider important in making an investment decision. Unfortunately, there is no bright-line rule as to what facts, or omissions of facts, a reasonable investor would consider important. Over the years, many issues have surfaced as to what nonfinancial information could, and would, be material to investors. Most recently, a discussion has been brewing about the materiality of sustainability. The investment community has been considering the materiality of sustainability disclosures to its investment decisions. As is often the case in these situations, there is a discernible tension between investors, who seek to expand mandatory disclosure rules, and company management.
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