Long-term value creation is a more central feature of the reporting of listed companies in the AEX and AMX indices nowadays, with 85% of them providing insight into how value is created and 69% reporting on what form this takes. This is a positive development. There is, however, room for improvement of the quality of this reporting, which needs to be more specific and in greater depth. This is the conclusion from the survey that the AFM is publishing today.
Value creation is a key element in good and informative reporting, as it gives a better impression of the risks and opportunities that a company faces. A current example of this concerns the effects of climate change, which may materially affect a company’s strategy, business model and results. The same applies to factors such as biodiversity, scarcity of materials and how companies deal with human rights.
There were a number of relevant developments in the area of non-financial reporting in 2019. The European Commission for instance published new guidelines for climate reporting by companies as part of its sustainable finance action plan. The Dutch Corporate Governance Code moreover has assigned a more central priority to long-term value creation since 2016.
Better understanding of risks and opportunities
In order to obtain insight into the reporting on long-term value creation by AEX and AMX companies, the AFM carried out a survey of 39 companies on the basis of their annual reporting for 2018. This survey considered the way in which value creation was reported and the extent to which this reporting was provided. Investors must be able to take well-informed decisions. Both non-financial and financial information need to be available and be relevant and of sufficient quality, including a broader focus on long-term value creation. This enables investors to better understand the risks and opportunities that a company faces.
Reporting can be more specific
The survey showed that reporting on value creation could be more specific. There can also be more attention paid to any destruction of value, which is the other side of the coin. Additionally, companies can provide better insight into the long-term and other effects of their chosen strategy in their value creation models.
The survey provides a number of examples of good practice as inspiration for parties to take action. The AFM calls on companies to speed up their efforts in this area.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.