CORPORATE REPORTING: RISING TO THE CHALLENGE
The global competition for capital is fierce and intensifying. Yet the information platform on which so much capital market activity is based has not been updated for over a generation. It is time for corporate reporting to step up to the plate, and become a partner, alongside businesses, stock exchanges and providers of financial capital, to help foster the conditions for investment, trade and job creation.
Modernising and improving the global corporate reporting landscape may not have the same prominence as reforming the prudential regulatory architecture or, indeed, the recent breakthrough in trade facilitation. Yet, in many ways, it is just as fundamental to securing our future economic success. Corporate reporting is a core lens through which investors assess a company’s value, make decisions about the viability of its business model, the balance of risks and strength of its management. If we can achieve a breakthrough in advancing towards a more meaningful corporate reporting system over the next few years, we can unlock value that has hitherto been hidden or unrecognised. This will help to enhance trust and confidence, as well as achieve a more financially stable global economy.
Integrated Reporting (<IR>) is market-led and prioritises information that is critical to the creation of value over the short, medium and long-term. Because of its focus on value, the information contained in an integrated report is a magnet for investment, as well as providing material data in context – precisely what investors need to make efficient and productive capital allocation decisions. While the International Integrated Reporting Council (IIRC) counts the World Bank, IOSCO and Financial Stability Board among its supporters, we are advocating innovation led by business and investor needs.
Stock exchanges play a vital role in providing access to deep pools of financial capital. The vital connection between our work and global capital markets has been cemented this year when in August, Deutsche Börse became the 100th business participant in the IIRC’s Pilot Programme, and I was honoured in October to be invited to participate in the WFE Annual Meeting in Mexico City. My engagement with stock exchanges has provided two key insights:
- The companies on your exchanges are overwhelmed by disclosure requirements, often introduced by regulators in the name of ‘transparency’; and
- High quality information matters to markets: it supports the efficient and productive allocation of financial capital, which is central to attracting long term investment and employment.
I believe that <IR> can play an important part in addressing both of these issues. Earlier this month, the IIRC released the International <IR> Framework, which establishes the principles and technical rigour underpinning the practical adoption of <IR> already taking place in over 25 countries. For too long corporate reporting has been a burden, for both preparer and reader. The objective of <IR> is to create a more cohesive reporting environment that leads to a concise communication about value over time.
The IIRC’s long-term vision is for integrated thinking to become embedded in mainstream business practice, supported by <IR> as the corporate reporting norm. The release of the Framework launches us on this ambitious journey. Key to achieving our goal will be engagement with the businesses listed on your exchanges and the investors who provide their financial capital. Our efforts will continue to be collaborative, at the heart of which is our philosophy of increasing innovation and experimentation to create an enabling environment where <IR> can flourish. This is an area where I believe exchanges can, and should, play an important role.
I invite you to join with us in bringing about an improved corporate reporting landscape by encouraging your market participants to rise to this important challenge.