• Non-financial disclosure integral to investor relations

    Although an investor's primary stake in an organisation is financial in nature, there's much more to this relationship than these concerns. 

    Ernst & Young (EY) investigated the state of the investment landscape in a recent survey, finding the influence of non-financial disclosures is having a noticeable impact on the way shareholders asses organisations. 

    However, the survey also raised a number of concerns for Australian businesses as a whole. EY revealed non-financial disclosures could challenge corporate affairs executives, as many investors feel they aren't receiving a comprehensive picture of organisations' operations. 

    Investors demand improved communication

    The main concern investors communicated to EY is that the companies they invest in rarely provide enough information regarding risk, particularly in regards to compliance issues. Almost two-thirds (63.6 per cent) of respondents believe organisations aren't disclosing risks that could ultimately affect financial performance. 

    The overarching trends of the Australian investment landscape suggests businesses will need to alter their disclosure requirements to attract monetary support. For example, nearly 80 per cent of investors take environmental concerns into account when evaluating an investment's viability. 

    While persons investing in the energy sector have accounted for environmental issues in the past, EY discovered this is now a point of interest across all industries. 

    Although this is positioned as a negative point, EY Oceania's Climate Change and Sustainability Leader Dr Matthew Bell believes businesses can turn this into a positive trend. 

    "There is an enormous opportunity for companies to capitalise on a growing thirst for integrated and value-driven reporting, that demonstrates just why their business will create value and provide returns for shareholders in the longer term," he explained. 

    "Companies that are able to provide the type of non-financial information that investors want may enjoy greater investor attention and, ultimately, be better positioned to attract and retain investors' capital."

    How can businesses enhance non-financial disclosure?

    Unlike financial reporting, non-financial disclosure is not mandatory in Australia. However, the Australian Securities Exchange created a list of voluntary guidelines for the way organisations should communicate their efforts in these areas.

    The guidelines exist as a series of principles on which organisations should base their corporate governance. Essentially, the management personnel within a company need to manage their accountability regarding non-financial concerns. 

    According to the Australasian Legal Information Institute, non-financial disclosure concerns such as labour standards or environmental issues must be included in a Product Disclosure Statement if they may affect the nature of an investment. 

    EY's findings should be regarded as an opportunity for the country's businesses to enhance their corporate affairs strategies, ensuring investors have the resources they require to make informed decisions. 

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