Global Reporting Initiative, August 1, 2012 -
New research reveals that investors and analysts use
'extra-financial' information to analyze companies.Investors and
analysts use extra-financial information reported by companies to
help analyze the performance of those companies and ultimately
inform investment decisions, according to new research published by
GRI, HRH The Prince of Wales's Accounting for Sustainability
Project (A4S) and Radley Yeldar earlier this year.
According to the report What Investors and Analysts Said,
extra-financial information - such as disclosures on governance and
environmental issues - has become an important and influential
consideration for investors and analysts. The research partners say
the results of the survey provide new insight into how financial
markets source, use and are influenced by extra-financial
Sarah Nolleth, A4S Project Director, says: "We are delighted to
see that the investor community is increasingly seeking
extra-financial information as part of their decision-making
processes. The increased credibility of, and demand for, these
sources of information will help sustainability considerations
become embedded into investors' assessments of a company's
"The report highlights the importance of integrated reporting,
but it is important to remember that companies also need
'integrated thinking', i.e., embedding sustainability into their
decision-making and strategy, as the precursor to successful
integrated reporting," she added.
According to the survey results, governance information is the
most relevant type of extra-financial information for investors and
analysts, with 70 percent of respondents rating it very relevant.
64 percent of respondents said information on natural resources is
very relevant to their analyses of companies. Social and community
information ranks lower, although 52 percent of respondents say
such information is very relevant.
The relatively low relevance of social and community information
could, the researchers say, be due to the difficulty in comparing
company performance on these issues. 61 percent of investors and
analysts surveyed said they find social information difficult to
compare; whereas only 41 percent said the same for environmental
information. In contrast, only three percent of respondents said
they find it difficult to compare financial information.
Nelmara Arbex, GRI's Deputy Chief Executive, comments on the
survey: "This research is one more piece of evidence showing how
organizational disclosure on sustainability impacts is popular
among investors. GRI expects the demand for sustainability
performance-related information to increase and sustainability
reporting to become standard practice. GRI's guidance will continue
to offer companies globally-recognized support to improve their
sustainability reporting practice, and prepare more focused
reports. This is the performance data we are all looking for."
Talking to investors
The research also investigated preferred communication channels
and formats for receiving extra-financial information.
A key finding was that investors and analysts use a wide range
of sources to gather financial and extra-financial information.
However, some channels - notably PDF format publications - were
more popular than others for certain types of financial and
Ben Richards, Head of Sustainability at communication specialist
Radley Yeldar, comments: "This research demonstrates that investors
and analysts rely on tried and tested channels of communication -
namely reporting and dialogue with companies - though this tends to
be part of a blended approach to information gathering. If they
need specific details, they'll use specialist sources. This means
reporters need to clearly guide these audiences through their
disclosure, which often appears in a number of places on their
The way companies communicate their sustainability performance
to their investors is key - and it's something investors are
definitely interested in, according to Mike Tyrrell, Editor of www.SRI-CONNECT.com, an online platform where
sustainable companies meet responsible investors. "As
sustainability issues become ever more relevant to stock prices,
the biggest and smartest investors globally are demanding deeper
and more direct communications from companies on their social,
environmental, economic and financial performance," says Tyrrell.
"'Deeper' means 'more focus on strategy and materiality'; 'more
direct' means face-to-face meetings and webcasts to supplement
robust GRI reporting."
The research was commissioned by HRH The Prince's Accounting for Sustainability Project
(A4S) and GRI, and undertaken by Radley Yeldar.
Download the publication here.