The value of Integrated Reporting is now widely acknowledged in the market, according to a new white paper, ‘Allocating Capital for Long-Term Returns‘ released by the Generation Foundation in May 2015.
The paper evaluates the progress made towards the recommendations set out in their initial white paper, ‘Sustainable Capitalism’ released back in 2012. Their conclusion is that the new model of capitalism they proposed, which included Integrated Reporting, “has gained significant momentum and support”.
The report states that, “An increasing number of companies are practicing Integrated Reporting or are in the process of making a transition to Integrated Reporting, suggesting the market acknowledges [its] value”. It suggests this change has happened due to the range of benefits <IR> has to offer, such as a more holistic view of performance and better insight into risk, strategy, the business model, the operating context and governance. It concludes that studies now find that firms practicing Integrated Reporting are “able to attract more long-term investors to their ownership base”.
The report, which draws heavily on the research of a wide-ranging number of organizations, continues stating that, “a focus on the long-term through Integrated Reporting is especially important in a modern market with shifting macroeconomic values, wherein an average of 84 percent of the market value of companies now lies in intangible assets”.
The Generation Foundation is the advocacy initiative of Generation Investment Management of which David Blood is the Senior Partner. Blood has been an important supporter of Integrated Reporting since the IIRC’s inception, having authored with Al Gore ‘A Manifesto for Sustainable Capitalism’ in 2011. In this manifesto they argued that, “Despite an increase in the volume and frequency of information made available by companies, access to more data for public equity investors has not necessarily translated into more comprehensive insight into companies. Integrated Reporting addresses this problem by encouraging companies to integrate both their finances and ESG performance into one report that includes only the most salient or material metrics. This enables companies and investors to make better resource-allocation decisions by seeing how ESG performance contributes to sustainable long-term value creation.”