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.
The full report can be accessed here.