Double materiality

Enel identifies potentially material impacts, risks and opportunities (IROs) related to sustainability issues, taking into account the main standards, including GRI’s Universal Standards and the sustainability reporting standards issued by EFRAG (see the list of sustainability issues in ESRS 1, paragraph AR16), as well as the outcome of the human rights due diligence perceived risk assessment⁽³⁾ and the activities described above that contribute to understanding the context in which the Company operates (ESG megatrend analysis and priorities provided by external stakeholders). In addition, the Company’s internal stakeholders contribute to the process of defining IROs, since, through their own activities, they manage the relationship with external stakeholders, knowing the potential impacts, risks and opportunities which might affect them or the organization.
Therefore, the external context in which the Group operates, including the Company’s business activities and relationships, is taken into account in the identification of impacts, while the definition of risks and opportunities considers how these may arise from the impacts generated by the Company, i.e., the existence of dependencies on natural and social resources as sources of potential positive and/or negative financial effects.
The list of potentially material IROs related to ESG topics (approximately 180 IROs were mapped in 2023) is considered the basis for internal stakeholder assessment, with the aim of determining the material impacts, risks and opportunities from which the corresponding material topics are derived. 

⁽³⁾ For additional details, see the chapter “Managing human rights”

Potentially material IROs relating to sustainability issues were subjected to assessment by internal and external stakeholders relevant to the Group, involving a total of 16 countries, to determine material impacts – the so-called impact materiality – and material risks and opportunities – the so-called financial materiality.
The methodology applied is outlined below

Impact materiality analysis consists of assessing the impacts generated by the Company on the economy, the environment and people, both negative (taking into account any human rights violations), and positive (evaluating the contribution to sustainable development). An ESG topic is therefore material, from the point of view of impact materiality, if it concerns material impacts (actual or potential, positive or negative) of the Company on people or the environment in the short, medium or long term.
Enel has been conducting the analysis of impact materiality since 2019 and over the years, taking into consideration the main reference standards available, such as those defined by GRI and EFRAG, it has strengthened the methodology adopted.
In particular, potentially material generated impacts were assessed on the basis of the following characteristics:

• negative (potential and/or actual):
  – scale: how severe the impact is or could be;
  – scope: how widespread the impact is or could be;
  – irremediable character: how difficult it is or could be to counteract or repair the resulting damage;
  – the likelihood in case of potential impact⁽⁴⁾;
• positive (potential and/or actual):
  – scale: how the impact can or could have positive effects;
  – scope: how widespread the impact is or could be;
  – the likelihood in case of potential impact.

On the basis of the characteristics described above, a workflow of questions was developed in the proprietary e-mia system to guide internal stakeholders, involved in the process, in the assessment of their own impacts. These evaluations make it possible to define a final score for each impact (expressed as a percentage from 1 to 100). On the scores thus obtained, the appropriate quanti-qualitative thresholds are applied to define the material impacts (see section “Material topics”).

⁴⁾ For potential impacts, the likelihood is considered together with the severity of the impacts. However, in the case of potential negative impacts on human rights, as specified in ESRS 1, paragraph 45, severity prevails over likelihood in identifying material topics.

Financial materiality analysis consists in identifying and assessing risks and opportunities related to ESG topics arising from the external environment, which affect or could affect, positively (opportunity)/negatively (risk), the Company’s financial position, results of operations and cash flows, access to finance or cost of capital in the short, medium or long term. Such information is particularly relevant for investors (socalled “primary users”) because, if omitted, misrepresented or obscured, it could reasonably influence their investment choices and decisions. Enel already conducted the financial materiality assessment in 2022 and in 2023, taking into consideration the changes introduced by the main European standard of reference available issued by EFRAG, it has strengthened the methodology adopted. Furthermore, financial materiality was also developed considering the relevance of ESG topics according to the SASB Standard in relation to Enel’s primary area of reference: “Electric Utilities & Power Generators Sector”.
n particular, potentially material risks and opportunities were assessed on the basis of the following characteristics:

• potential magnitude of financial effects;
• likelihood of occurrence.

On the basis of the characteristics described above, a workflow of questions was developed in the proprietary e-mia system to guide internal stakeholders, involved in the process, in the assessment of risks/opportunities within their remit. These evaluations make it possible to define a final score for each risk/opportunity (expressed as a percentage from 1 to 100). On the scores thus obtained, the appropriate quanti-qualitative thresholds are applied to define the material risks/opportunities (see section “Material topics”).