Institutional investors and analysts still only make limited use of non-financial information, for example in their investment decisions. Companies are also failing to encourage this enough by providing relevant and reliable non-financial information. This is the conclusion of an exploratory study by the Dutch Authority for the Financial Markets (AFM). Standardisation and new legislation are important steps to encourage in the use of and information on non-financial aspects in reporting.
- The effect of non-financial aspects at companies on future performance could be stated more clearly.
- According to investors, the availability of relevant non-financial information is limited.
- Institutional investors still pay limited attention to the long term.
- Standardisation and new legislation could help.
- The exploratory study was conducted using desk research and qualitative interviews.
The effect of non-financial aspects at companies on future performance could be stated more clearly
According to investors and analysts, companies could ensure that they pay more attention to non-financial information. In their reporting, companies could provide greater insight into their business model and more clearly state the effects of non-financial performance and risks on their future financial position.
According to investors, the availability of relevant non-financial information is limited
Investors also state that only limited non-financial information is currently available and that the information that is provided is incomplete and also not comparable. In their view, standardisation of non-financial reporting would make this information more relevant and reliable. According to those interviewed, this could involve usage of uniform definitions and assurance reports from an external party subject to supervision.
Institutional investors still pay limited attention to the long term
Investors and analysts say that their attention to non-financial aspects is driven mainly by legislation and regulations relating to sustainability and pressure from their stakeholders. At the moment, this relates mainly to impact in the short term, such as costs. They are less interested in how non-financial aspects could have an impact in the long term. Scant attention is paid to non-financial aspects at public contacts such as shareholder meetings (GMSs). These issues are raised in one-on-one contacts.
Standardisation and new legislation could help
The AFM believes that previously initiated standardisation of non-financial reporting and upcoming legislation and regulations, such as the EU sustainable finance taxonomy, may also give a positive boost to the use of non-financial information by investors and analysts. Companies can assist in this process by reporting relevant and reliable non-financial information.
Exploratory study conducted using desk research and qualitative interviews
The exploratory study was conducted in 2020 with the aim of obtaining insight into the use of non-financial information by institutional investors and analysts and the provision of this information by listed companies. This involved the use of desk research and qualitative interviews. A follow-up to the exploration will be conducted later this year.
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.