Market Valuation of Non-Financial Performance

This Laboratory, led by Lloyds TSB and Telecom Italia - in conjunction with CSR Europe, the European Academy for Business in Society (EABIS, through the sponsorship of Microsoft, Unilever, IBM, Shell, Johnson & Johnson), Cranfield School of Management, European Federation of Financial Analysts (EFFAS), Eurosif and Sodalitas, makes the case that better mutual understanding between companies and investors around the sources of non-financial performance is a key driver for more accurate analysis of long-term business value. This laboratory has resulted in a European Framework that explains the potential links between financial and non-financial performance and a final EABIS research report which looks at how ESG factors impact business success, how companies explain these linkages to investors, and how the investment community treats this data. The leaders of this Laboratory played a pro-active role in the recent European initiative on ESG Disclosure (DG Enterprise). They also are a catalyst for the new European Combined Reporting Alliance for ESG that includes organisations such as EFFAS, Eurosif, the Prince’s Charities “Accounting for Sustainability”, WICI and Railpen Investments.

Did you know?

• Capital markets are only as efficient as the information available to the market players
• Between 2002 and 2007 companies consistently participating in the BITC's CR Index outperformed, in terms of total shareholder returns, the FTSE 350 by 3.3% to 7.7% each year
• Only 19% of investors and 27% of analysts found financial reports very useful in communicating the true value of companies 

Corporate Responsibility and Market Valuation of Financial and Non-Financial Performance

Financial performance indicators have traditionally marked whether or not to invest in a firm. Non-financial indicators, however, are also indicative of the future performance of companies.

While it is broadly accepted that environmental, social and governance (ESG) issues impact a company's financial performance and share price, making this causal link in a manner useful for investors remains elusive - and urgent.

The work led by Lloyds TSB and Telecom Italia - in conjunction with CSR Europe, the European Academy for Business in Society (EABIS, through the sponsorship of Microsoft, Unilever, IBM, Shell, Johnson & Johnson), Cranfield School of Management, European Federation of Financial Analysts (EFFAS), Eurosif and Sodalitas makes the case that better mutual understanding between companies and investors around the sources of non-financial performance is a key driver for more accurate analysis of long-term business value.

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Valuing Non-Financial Performance: A European Framework for Company-Investor Dialogue (May 2010)

This report, based on the work of the Laboratory since 2007, discusses the links between financial and non-financial performance and outlines a European Framework for company-investor dialogue.

Sustainable Value - EABIS Research Project (September 2009)

This the final report from a two-year EABIS funded research project to explore how the environmental, social and governance performance of companies might impact on the drivers of business success; how companies explain these linkages to investors, and how the investment community treats these data. The research project was run in close contact with th Laboratory.

Consultation Report: Valuing Non-Financial Performance (December 2008)

Read more at www.investorvalue.org

See Also . . .

• Over 150 company solutions on Stakeholder Engagment in our CSR solutions database
• Over 50 company solutions on Communication and Reporting in our CSR solutions database
• More information about the CSR Laboratory on Corporate Responsibility and Market Valuation of Financial and Non-Financial Performance

This laboratory has transitioned into an Enterprise 2020 Collaborative Venture, read more.

Laboratory Leaders and Facilitators

EABIS Sponsors