Investors are incorporating non-financial factors into their decision-making to a larger extent as concerns over stranded assets increase, says EY.
In an EY report, Tomorrow's Investment Rules 2.0, it was reported that 70.9 per cent of investors consider integrated reports when making an investment decision.
The report, which collected data from more than 200 institutional investors, found that Australian investors are the most likely to see non-financial data as relevant across all sectors, with 82.6 per cent valuing such methods.
The report argued that the increased take-up of non-financial data stems from concerns over stranded assets. Nearly two-thirds of respondents are concerned that exogenous factors tied to social or environmental change will impact their investments.
International Integrated Reporting Council chief executive and report contributor Paul Druckman said: “Given today’s complex business models and operating environment, markets need clear, high-quality information in order to allocate capital efficiently and productively.
“Consequently, investors need information that goes beyond financial statements to commit to making both short-term and long-term investment decisions."
EY climate change and sustainability leader, Oceania, Matthew Bell said investors' expectations and attitudes to non-financial reporting have clearly shifted.
EY found that 59.1 per cent of investors consider corporate or social responsibility (CSR) or sustainability reports essential or important when making investment decisions.
According to the report: “In the face of growing concern over stranded assets and other risks, institutional investors around the world say they are increasing their integration of companies’ ESG and other non-financial information into their investment decision-making."
The report pointed out that 46.4 per cent of investors do not consider non-financial data because it is unclear whether it has a material of financial impact.
Further, 28.6 per cent don’t evaluate non-financial data because the information is unavailable or inconsistent.
“As non-financial concerns continue to emerge as material to investment decisions, companies will likely be increasingly expected to provide this information alongside financial information in integrated reports,” the report said.