More institutional investors are relying on non-financial information to make better investment decisions and evaluate a company’s value creation. Integrated reports can help to fill information gaps.
For the second year in a row, Ernst & Young’s Climate Change and Sustainability Services (CCaSS) has pursued a study among 200 institutional investors including portfolio managers, equity analysts, chief investment officers and managing directors. The study investigates the investor’s view on the availability and quality of corporate non-financial information and on whether investors relied on integrated reporting tools when making investment decisions.
70.9 percent of investors say that integrated reports are an essential source when making investment decisions. This ranks integrated reports second in usefulness after a company’s annual reports. Moreover, 59.1 percent of investors consider corporate social responsibility report when making investment decisions.
What investors look for in non-financial information is, from most to least investors stating it is essential, the business impact of regulation, evidence of improved future valuation with business forecast, good corporate citizenship such as company policy on business ethics, client demand from corporate investors, return on investment in ESG activities, company policy on assessing non-financial factors, personal values as well as investment codes and advisors.
In order to be useful for investors, the non-financial information must include sector or industry-specific reporting criteria and KPIs, link to non-financial risks and statement future performance and what ever is most material to the company’s value creation.