Confessions of a tree-hugger

07 April 2017

At the end of February PwC released this year’s Global investor survey, marking the second time the views of investors were compared and contrasted with the views of CEOs. I find this comparison fascinating, because investment professionals tend to have a very distinct point of view, which I’ve encountered first hand. My own journey inside the minds of investors starts with integrated reporting.

I first discovered integrated reporting a few years ago. Such was my interest that one moment I was being introduced to the concept, and the next I was enrolling for a post-graduate diploma to study it.

What attracted me to integrated reporting was the promise of making the world a better place. Businesses would be forced to think about the bigger picture and be responsible corporate citizens.

Snapping back to reality

It’s easy to be passionate about something when you’re surrounded by others who share your enthusiasm - as I was during my post-grad diploma.

Then I encountered a hurdle: I was asked to facilitate a discussion forum with a group of investment professionals, and for the first time I encountered the faces of those whose “buy-in” to integrated reporting was essential, according to our countless classroom debates. After all, the International Integrated Reporting Framework identifies providers of capital as the primary audience for an integrated report. These investors sitting in the room with me should have a front row seat when it comes to integrated reporting, right?

Wrong.

Most of the investors thought that integrated reporting and sustainability reporting were the same thing. They would throw around terms like “tree-hugger” and every time I tried to engage an investor on the topic of integrated reporting, I left disappointed. Sure, they cared about sustainability - but only when it came to cash flows and profits. The only information that seemed important to them was purely financial and exactly the kind of thinking that integrated reporting sought to change. I was a tree-hugger in what seemed to be a world of lumberjacks.

Looking beyond the business

Despite this disappointment, I really enjoyed engaging with the investors during meetings. They had amazing insight into businesses and markets, and a view on investing that I had never spent time thinking about: people invest money in companies, and that money enables companies to create a great working environment for their employees, to bring essential infrastructure into communities where there previously was none. To then conduct research into making their processes more innovative and environmentally friendly, and ultimately better for the consumer and investors.

It should make sense that a company that has enough vision to allocate its resources sensibly, will naturally be profitable. This may not be the case for some companies, but I would hope this is true for the majority. With that in mind, it made even more sense to me that investors should be paying more attention to companies’ integrated reporting. It gives the insight into the quality of management that investors always seemed to praise, and demonstrated how investors’ funds were ultimately being spent. An investor interviewed for the Global survey rightly pointed out, “For-profit companies need to have for-profit goals. Those for-profit goals must be broadened; companies must think about their environment broader than just their business.”

That new perspective tells me:

  1. A good investor will care about a company’s integrated reporting because it will be a testament to how that company is running a sensible, responsible business that will continue to exist despite the challenges of today’s rapidly changing world. Some investors have already spotted this, according to one interviewed for the Global survey: “Companies that are good at dealing with environmental, social and governance matters aren’t necessarily good investments, but companies that are bad at it are often considered riskier investments.”
  2. It’s still our responsibility to encourage the investors we engage with to look beyond exclusively financial metrics for the greater good, since this will encourage companies to keep on doing those sensible things I mentioned before.

Because, by definition, the greater good should be good for all of us.

I look forward to continuing my journey inside the minds of investment professionals. I believe their perspective is an important component in understanding the business context to the world we live in today, and, given the findings from our survey, I’m confident their perspectives will continue to evolve as the world continues to change.

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