For example, future political or regulatory risks, the alignment of management and board with long-term company value, the quality of human resources management, risks associated with governance structure, the environment, branding, corporate ethics and stakeholder relations.
EFIs generally have one or more of the following characteristics:
- they tend to be qualitative and not readily quantifiable in monetary terms (e.g. corporate governance, intellectual capital)
- they relate to externalities not well captured by market mechanisms (e.g. environmental pollution)
- they relate to wider elements of the supply chain (e.g. suppliers, products and services)
- they are the focus of public concern (e.g. GMOs)
- they have a medium to long-term horizon (e.g. global warming)
- the policy and regulatory framework is tightening (e.g. greenhouse gas emissions)
believe good management of extra-financial performance can reduce risk and may, in so me circumstances, deliver added value. If research providers can analyse and make more transparent the materiality of extra-financial issues and show where these may enhance or detract from value creation, investors will be better able to select companies for long-term investment.
