21 Oct 2011  Working Papers

Market Interest in Nonfinancial Information

Executive Summary — During the past two decades, there have been many ideas for improving business reporting of nonfinancial information such as on a company's environmental, social, and governance (ESG) performance. Using data from Bloomberg, authors Robert G. Eccles, Michael P. Krzus, and George Serafeim provide insights into market interest in nonfinancial information at a level of granularity not available until now. They identify exactly what information is of greatest interest, contrasting both the global and U.S. market across the full spectrum of ESG information and for each component of ESG, as well as Carbon Disclosure Project metrics. They also show variation in interest across asset classes and firm types, and present preliminary explanations for these differences. Key concepts include:

  • From a practitioner perspective, these data can be used to benchmark one's own information use according to asset class and firm type. Practitioners can assess whether any differences represent competitive strengths or weaknesses in the information they are using in their decisions.
  • Companies can use these findings to create more sophisticated communication strategies tailored to the information needs of market participants across asset classes and firm types.
  • At the aggregate market level, interest in environmental and governance information is greater than interest in social information.
  • Equity investors exhibit a higher interest in nonfinancial information compared to fixed income investors.
  • Sell-side firms (broker-dealers) are primarily interested in greenhouse gas emissions data. In contrast, buy-side firms (hedge funds, insurance firms, pension funds, and money managers) are interested in a broad range of environmental, social, and governance information.
  • The efforts of practitioners and researchers can improve the dissemination and use of nonfinancial information, thereby enabling companies to create more sustainable strategies for a more sustainable society.

 

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