The International Integrated Reporting Council has welcomed the publication of EY’s report ‘Is your nonfinancial performance revealing the true value of your business to investors?’ as yet another piece of compelling research which demonstrates unequivocally that investors are looking to businesses to communicate their broad story of value creation, beyond the purely financial.
Integrated reports are cited in the research as the second most useful source of nonfinancial information when making an investment decision. Furthermore, 92% of respondents to the investor survey agree 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 confirms that investors overwhelmingly agree with the thinking set out by Larry Fink, CEO, BlackRock in his annual letter calling on businesses to set out their long term strategy for value creation.
Richard Howitt, CEO, IIRC is quoted in the research stating, “We welcome this leading research from EY, which confirms increasing investor focus on long-term value. It is particularly pleasing to note the broad support for BlackRock’s call for Boards to lay out each year a strategic framework for long-term value creation. The survey underlines the role Integrated Reporting can play in achieving this agenda. The findings offer a rationale for all investors to make more structured analysis of wider information in their appraisal and decisions — such a shift encourages companies to go further in their disclosure of performance metrics. Investors are going further, companies want to and Integrated Reporting is the means for them to do so.”
The IIRC works internationally to ensure that businesses are meeting the information needs of investors and will be sharing this research widely as yet further impetus for businesses to rise to the challenge of communicating value effectively in the 21st century.
The research states, “there is a global trend toward increased interest in nonfinancial information on the part of investment professionals” continuing, “Nonfinancial performance plays a pivotal role in the investment decisions for most of the surveyed investors, and for a greater percentage of investors than in previous years.” 82% of respondents agreed that environmental and social issues offer both risks and opportunities, but for too long, companies have not considered them core to their business.
The research quotes Edmond Schaff Head of selection, Cedrus Asset Management, saying, “If you take this integrated approach, it’s even easier to be aligned with fiduciary duty of the portfolio manager, because it leads you to look at a broader set of risk and opportunities, larger than what you can derive from financial data, like the balance sheet.”