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IIRC INTEGRATED REPORT 2017 / Building a bridge from corporate reporting to financial capital allocation

Building a bridge from corporate reporting to financial capital allocation

Strategic theme 3:

Building a bridge from corporate reporting to financial capital allocation

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Activities/outputs

Investor statement

We launched the Investor statement of support for integrated reporting at the PRI in Person Conference with 12 signatories from mainstream investor organizations from the UK, the Netherlands and Australia: Aberdeen Standard Investments, Achmea, Investment Management, Aegon Asset Management, Cbus Super, Eumedion, Evenlode Investment, Hermes Investment Management, Martin Currie Investment Management, NN Investment Partners, PGGM Investment Management, Triodos Investment Management, VicSuper.

We are using this statement to demonstrate to businesses the growing demand for integrated reporting from the investor community and to build further investor support, signing up a further seven investors in 2018: Allianz Global Investors, Comgent, Edmond de Rothschild Asset Management France, EFFAS, Resona Bank, Sparinvest International and WHEB Asset Management.

Investor engagement

As well as bilateral engagement with investors, we connected to relevant investor-led initiatives, including speaking at a seminar hosted by the Australian Council of Superannuation Investors and G100, ‘Dialogue for longer-term value creation – Bridging the information gap between capital market participants’, and attending the annual event of the ‘CEO Force for Good Strategic Investor Initiative’.

We published ‘Creating Value: Benefits to Investors’, highlighting what the <IR> Framework aims to deliver to investors and how it helps to meet their demands for better information from investee companies.

Partnerships

We signed a new memorandum of understanding (MoU) with the CFA Institute, in which they committed to communicating about integrated reporting through their conferences, the media and with their members; high-level advocacy from its leadership; and making appropriate representations within policy and regulatory arenas.

We are pleased to continue our partnership with the International Corporate Governance Network (ICGN) with whom we will deliver our second joint conference in 2018, working also with our close partners JICPA and the Tokyo Stock Exchange.

Performance indicators

Global investor survey

EY’s 2017 global investor survey found that integrated reports remained the second most useful source of non-financial information when making an investment decision behind the annual report. The majority, 57%, of the respondents considered integrated reports to be essential or very useful in conveying non-financial performance when making investment decisions, though this represents a fall from 71% from the previous study in 2015.

92% agreed that public company CEOs should lay out an explicit strategy each year for long-term value creation and directly affirm that the company’s board has reviewed it. This is consistent with integrated reporting, indicating the issue above is about the current quality, rather than the purpose or integrated reports. Our technical work programme will help in this regard (pages 8-9).

Other evidence

Strong evidence of increased demand from investors for integrated reporting came from the CEO of BlackRock’s annual letter to the US and EU CEOs which called for companies to provide “an annual strategic framework for value creation”, which is highly consistent with integrated reporting.

These results are consistent with other research published during 2017 including, ‘The Investing Enlightenment’ by Bob Eccles and Mirtha Kastrapeli in collaboration with State Street, and PwC’s ‘2017 Global Investor Survey’.

While we are making progress in the investor space, more active and effective engagement is constrained by our limited resources.

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