Why integrated reporting suits our investment philosophy

Posted
9 January, 2019

Dr Roland Rott, Head of ESG at La Française Asset Management, shares his insights into why La Française has signed the IIRC’s investor statement signalling its support for integrated reporting

We are delighted to sign the Investor Statement of the International Integrated Reporting Council (IIRC) in support for integrated reporting. By doing so we want to help companies understand that, if they deliver relevant and useful information, we will use it. We require this information as part of our effort to drive the development of more sustainable and stable businesses in the longer term.

We support the aim of the IIRC’s Framework of providing more relevant, business-focused information. We appreciate when companies clearly explain their business model, their strategy and how this is applied in practice, helping us to understand the key stakeholders on which their business relies, and the utility of the most important assets, including those not visible on the balance sheet.

The IIRC Framework is particularly well suited for our investment philosophy. When making investment decisions we combine our assessment of financial performance and ESG performance in the context of a company’s strategic positioning. The latter comprises the ability to change and the capacity to innovate.

We encourage companies to consider the IIRC’s Framework as a useful toolkit for reporting and a means of focusing their communication with investors. Improved non-financial reporting will help to drive better governance and stewardship practices through more comprehensive identification and management of current and future opportunities and risks.

The unique strengths of the International Integrated Reporting Framework are in linking and demonstrating the benefits of and need for carefully assessed investment in all material capitals including natural capital, human capital and financial capital. If companies successfully apply the principles of integrated thinking and reporting and we, as investors, foster and encourage this behaviour it should make a real contribution to a better future for our clients and society.

As investors, we have a fiduciary duty to act in the best interest of our clients. To perform this role, we need to understand the long-term return prospects of the businesses in which we invest. Therefore, we need to understand not only their immediate financial performance, but the strategy of the business, the key resources and assets to which it has access and how it intends to maintain access to these resources and maintain or improve its assets.

We are pleased to join a growing number of investment institutions as signatory. The greater transparency and clarity of understanding of businesses, which the principles of Integrated Reporting can offer, create a great opportunity for the professional investment community to encourage better capital allocation.