A recent report published by Ernst & Young examined the increasing use of non-financial reporting data by investors. Over the past 12 months, 9 out of 10 investors surveyed found that non-financial performance information played a crucial role at least once in their decision-making.
Investors highlighted materiality and a link to financial performance as two key factors they looked for when reviewing ESG data. Geographic locations had a significant impact on the frequency with which non-financial information was used. Over 70% of respondents based in emerging markets frequently or occasionally used non-financial data, compared with only 49% of those in developed markets. Non-financial reporting was considered to be particularly relevant in the mining, energy and industrial sectors.
12% of investors said they would immediately rule out investing in an organisation if risks in the supply chain were not addressed, while 75% would reconsider investing in a company exposed to environmental risk or with a history of poor environmental performance.
The report concludes that companies can derive significant value from being more transparent on environmental, social and governance issues.