Asset managers, champions of Integrated Reporting

by Nadia Woodhouse

I was delighted to attend, on behalf of Net Balance, the Colonial First State luncheon with Mervyn E King, Chair of the International Integrated Reporting Council (IIRC) in his recent visit to Australia. King is best known for chairing the King Committee on Corporate Governance, which endorsed an integrated and inclusive approach to corporate governance in South Africa. Over lunch, King delighted us with an insightful view into the role of boards, the role of institutional investors and the role of the next generation in driving organisational sustainability.

The role of the board is critical in driving the sustainability agenda of organisations. Board members should be actively engaging in integrated thinking – considering financial and non-financial performance and risk together, and reporting on this way of thinking. An integrated report gives stakeholders an insight into the way organisations think, and therefore the way they will act in the future. Through integrated reporting, the board has an opportunity to turn a large and lengthy annual report into a useful document.

Who then will drive the move to integrated reporting? King believes that regulation and changes to the ASX listing rules will do little to change behaviour. He believes that it is therefore the role of asset managers, as large providers of capital to encourage integrated reporting. No one capital provider can do this alone, however Australia can look to the Code for Responsible Investing in South Africa (CRISA). Much like the UN-backed Principles for Responsible Investment (PRI), Principle 3 of this code provides that "where appropriate, institutional investors should consider a collaborative approach to promote responsible investing.” Could it be time for asset managers across Australia to act collectively? King believes that acting as an owner, and not a trader, will be the first important step to achieving this.

While the role of the next generation is key, we cannot delay our responsibility. Ideas around corporate governance and disclosure are evolving, and social media is one new development in how companies communicate. With 400,000 tweets occurring every minute, King argues that what can be said about your company already has been said, and disclosing organisation strategy through integrated reporting will not be breaching confidentiality. Much like the shift from the Global Reporting Initiative’s G3.1 framework to the G4, integrated reporting is much more than historical disclosures. It’s about expressing how an organisation will create value over the short, medium and long term, giving asset owners the confidence that on organisation will remain sustainable, in all senses of the word, far into the future.

Nadia Woodhouse is a Senior Associate of Net Balance (nadia@netbalance.com),
one of the world’s leading sustainability advisory firms.
Nadia is based in Melbourne
.

To subscribe to our blog updates, newsletter or get other information from Net Balance, click here.