Nine out of 10 investors say non-financial performance information released by a company had a ‘pivotal role’ in an investment decision at least once in the past 12 months, according to a survey by EY.
The study of 163 investors, analysts and portfolio managers also shows that about two thirds of investors carry out some form of evaluation of non-financial performance information before making investment decisions. About half of those investors use a structured process.
At the same time, almost 36 percent say they conduct little or no review at all of non-financial information and many of those who do carry out some review process – about a third of all investors surveyed – use less formal methods, basically relying on their own judgment.
‘One significant trend we have uncovered is that non-financial information is increasingly being used to inform decision making on investments,’ note the authors of a report based on the survey. ‘Investors are using a mix of formal and informal methods to assess non-financial information. It is, however, evident that investors still feel reporting is often insufficient to meet their needs.’
The survey also shows that non-financial performance information ‘frequently’ plays a ‘pivotal’ role in the investment decisions of 23 percent of investors, while it occasionally affects decisions for just over 34 percent. About 31 percent of investors say it ‘seldom’ plays a role and 11 percent say non-financial information ‘never’ plays a role.
‘This demonstrates that the analysis of non-financial issues can no longer be dismissed as a niche approach to investment,’ the report concludes. ‘Of the 11 percent [of respondents] who say non-financial performance did not play a key role in the past 12 months, the principal reason they give is that it was unclear whether the non-financial disclosures were material or had a financial impact.’
About half of the investors cite ‘business impact of regulation’ as essential non-financial information, while 36 percent cite risk minimization and 32 percent say ‘evidence of improved future evaluation’ is essential. Just under a quarter say good corporate citizenship is ‘essential’.
