Information Overdrive: The Integrated Reporting Movement Is Gaining Momentum as the Investment Community Puts Its Considerable Weight Behind the Concept. A Leading Light in the Campaign, Steve Waygood of Aviva Investors, Traces Its Progress So Far

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Although integrated reporting is a relatively new idea, Steve Waygood, chief responsible investment officer at Aviva Investors, has been interested in encouraging firms to make more complete disclosures for the past 15 years. This stemmed from a frustration in his company about the lack of detailed information on which to base its investment decisions.

"Markets work on the basis of data. If the information we rely on from companies is short term and thin, then a short-termist view will prevail in the capital markets," he says.

With this in mind, Aviva Investors has been among a growing group of big asset management firms pushing for companies to report non-financial aspects of their business in order to paint a more detailed picture of their current and likely future performance.

"'Non-financial' doesn't mean that these issues are irrelevant to evaluation," Waygood stresses. "We need some idea about areas such as customer retention, employee retention and government relations in order to have some satisfaction about a company's cash flows."

A watershed moment for Aviva Investors came in 2008 when Alan Dromer, its chief executive at the time, called for a debate with stock exchange listing authorities on the issue. He was pushing for a requirement on the boards of all firms with market caps of $2bn or more either to issue sustainability reports or to explain why not. Dromer's declaration quickly caught the attention of Gavin Power, deputy director of the United Nations Global Compact, a joint initiative between the UN and big business to promote sustainable commercial development. Power and Aviva Investors organised a conference the following year at the UN's headquarters in New York, where Paul Abberley, the company's current interim CEO, spoke. The event drew a number of key regulators, standard-setters and big investors, including the International Organization of Securities Commissions, the World Federation of Exchanges and Goldman Sachs.

"All of them", Waygood recalls, "were saying that this was the way forward."

The movement snowballed to such an extent by 2011 that a similar event attracted representatives of asset management firms controlling a total of $5trn in investment funds. The Sustainable Stock Exchanges Initiative was born, modelled on the approach taken by the Johannesburg Stock Exchange and influenced by the work of Mervyn King, professor of corporate citizenship at the University of South Africa, who had written a pioneering paper on integrated reporting in 2009. Waygood reports that the Johannesburg Stock Exchange's equivalents in Brazil, India and Hong Kong have since adopted roughly similar approaches, while others are looking at how to incorporate ideas about wider corporate disclosure.

"The exchanges in Singapore and Malaysia have changed their guidance and I know that Istanbul and Nasdaq are talking about it. Nasdaq hasn't done anything yet, but it has asked all investors to come together on this issue. It would prefer that every exchange does the same thing," says Waygood, who believes that the US stock market is anxious to ensure that any new rules don't drive companies away from it--which is what happened in 2002 when the Sarbanes-Oxley Act tightened up the corporate governance standards expected of US-listed firms after the Enron and WorldCom scandals.

The engagement with exchanges is still very much a work in progress--London and New York, for example, are not yet committed, but talks are ongoing, he says. "Deutsche Borse and Toronto Stock Exchange have been very engaged, although they haven't taken the obvious step in changing their listing rules."

Road from Rio

While some headway has been made in increasing the number of firms committed to making any form of wider disclosure, a "phenomenal" gap remains in the range and quality of data being reported, according to Waygood. Determined to hasten progress, he was influential in convening 40 like-minded organisations to form the Sustainability Reporting Coalition, which last year lobbied the UN at its Rio conference on sustainable development to produce a comply-or-explain framework for sustainability reporting. …