The Value of Non-Financial Reporting to UK Investors

There are increasing regulations and calls for companies to provide more and better non-financial information (e.g. CSRD, TNFD, ISSB). A key driver of this increased pressure is that non-financial information (NFI) and non-financial reporting (NFR) is assumed to improve investment decisions and assessments of risks and company performance. Indeed, there are many studies noting the increasing usage of NFI in investor decision-making, but there are few studies that quantify the value of this information. 

Our research contributes to the literature by providing evidence on: (i) how and why investors are using NFR in the UK; and (ii) what the benefits of NFR are to those investors. Working for the UK Department of Business and Trade (DBT) we explored investors’ use and demand for NFR through literature review, investors interviews (n=40), asset management firm consultations (n=6), and investor surveys (n=2000). 

We estimate that the current UK NFR requirements are worth £11 billion and £26 billion per year to investors, compared against no requirements. Our choice modelling also estimates that requirements to improve the quality and comparability of NFI across companies could increase the value of NFR by an additional £6 billion to £16 billion per year. In comparison, we estimate that asset managers in the UK are spending around £140 to £230 million a year to use NFI, or a fraction of the benefits to investors as a whole. Our research further finds that almost all investors are using NFI to some extent to inform their investment decisions and support portfolio confidence, and that NFR is a key resource of this data, including the “softer” elements of reporting such as the narrative a company tells about itself and its future. As one investor told us: “profit and loss statements and balance sheets can only tell you so much about what a company is worth”.  

Session Chair: Orkid Russell  

Orkid is a principal social researcher at the Department for Business and Trade and works in the company law and governance directorate. Leveraging her background in social research, she has led analysis on corporate reporting and sustainability reporting for the past five years. Orkid's expertise spans policy analysis, research commissioning, stakeholder engagement, monitoring and evaluation. Managing this project client side are among her recent accomplishments as well as overseeing research into the EU's Green Taxonomy Framework.  

Russell Drummond  

Russell is an economist with experience across a range of methods including non-market valuation (stated preference, revealed preference, and value transfer), appraisal, benefits assessments, and natural capital approaches. In his work at eftec he has applied these methods to topics spanning the freshwater environment, terrestrial biodiversity, marine biodiversity, housing development, infrastructure, and the value of information.  Prior to joining eftec, Russell completed a MSc in Economics at UCL, where his dissertation focused on congestion pricing policies and road use within the UK. He also studied and worked at Portland State University as a research assistant.