Interview with ICGN: How are you encouraging uptake?

Posted
27 May, 2015

An interview with George Dallas, Policy Director, International Corporate Governance Network

Why does your organization support <IR>? 

The ICGN is an investor-led body established in 1995 with over 600 members, including institutional investors with assets under management of $26 trillion. Our mission is to inspire and promote good standards of corporate governance, both to improve the sustainable performance of investee companies and to promote healthy and efficient financial markets.

The ICGN is supportive of <IR> as a reporting framework, given the importance of companies providing a holistic account of how they create and sustain value by bringing together with financial reporting information that is not normally disclosed in the financial statements. As part of its own strategy the ICGN intends to promote better understanding of integrated business reporting both by setting out disclosure criteria that will assist companies in meeting the expectations of investors and to assist investors on matters that can be raised in dialogue with companies that arise from company communications to the market.

The ICGN aims to help enhance substantive engagement between investors and company boards and management about the content and timing of integrated business reporting and decision-making by companies. <IR> serves to support these objectives, which we believe will enhance both investor and company understanding, thereby promoting sustainable corporate success and value creation.

Why should your members get behind <IR>? 

In a fast-changing and globalising world, information material to investor decision-making is becoming increasingly diverse and dynamic. Long-term success in managing a business in today’s complex economic, environmental and social landscape is increasingly dependent on factors not directly reflected in financial statements and strategic decisions will usually need to be based on a broader set of factors than those reflected in financial statements. <IR> has an important role to play in this regard, particularly given its focus on investors as users.

Investors need access to information on how companies are managing such factors when assessing a company’s present and future valuation and the company’s ability to understand its opportunities and risks. Examples of such issues include the risks and opportunities posed by climate change, a company’s approach to managing intellectual and human capital, its capacity to innovate, its supply chain management, its environmental management systems and human rights policies and practices. These represent a growing class of factors that drive company performance and value. All can have an impact directly on short and long-term value creation and destruction through effects on reputation, enhancement of customer satisfaction and loyalty, and relations with employees and other stakeholders. This type of information, when combined with financial information, can provide valuable insights to the overall quality of management – a critical factor in the appraisal of a company’s financial prospects and the viability of its business model.

How is ICGN working towards <IR>?

One of ICGN’s seven policy committees is its Integrated Business Reporting Committee, which focuses both on promoting Integrated Reporting by companies, but also “integrated thinking” by companies and investors. This Committee has been in existence since 2008, and signals the prominence of Integrated Reporting in the overall work of ICGN. This Committee has prepared a guidance note on Integrated Reporting for investors that we make available to our members and to the general public. This guidance statement is being updated in 2015 and the revised version specifically articulates ICGN’s support for <IR>. In addition ICGN’s Global Governance Principles are clear in their support of Integrated Reporting by companies to enable investors to achieve a more complete understanding of company risks and opportunities.  Integrated Reporting also has been a regular theme of ICGN conferences, and this has included involvement from IIRC representatives.

Links to ICGN Global Governance Principles and ICGN Integrated Reporting Guidance: https://www.icgn.org/best-practice