Integrated Reporting: A Holistic Approach to Creating Organizational Value. Bob Laux, North American Lead International Integrated Reporting Council

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1 Integrated Reporting: A Holistic Approach to Creating Organizational Value Bob Laux, North American Lead International Integrated Reporting Council

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3 Multiple Capital Approach

4 Why <IR>? More than financials Source: OCEAN TOMO LLC January,1,2015

5 Findings From McKinsey Study Short-term pressure on executives has increased since 2013 Share of respondents feeling most pressure to demonstrate strong financial performance within two years or less rose from 79% to 87% Those who felt that pressure most acutely over 7 years or more fell to zero Those who felt most pressure over a period of less than six months increased from 26% to 29%

6 Findings From McKinsey Study Long-term cultures are a boon to financial performance From 2001 to 2014, long-term companies identified increased their revenue by 47% and their earnings by 36% more From 2007 to 2014, their R&D spending grew at an annualized rate of 8.5%, greater than the 3.7% rate for other companies Country would have generated at least five million more jobs from 2001 and 2015 and an additional $1 trillion in GDP growth

7 Value Creation in the Insurance Industry The insurance industry faces specific challenges - the increasing burden of regulations, solvency requirements, economic uncertainty, demographic shifts, climate change, medical innovation, digitalization, etc. - that need to be effectively addressed to meet competitive pressures and take advantage of opportunities to achieve sustainable growth Insurers are dealing with significant business model evolutions impacting all their business lines and each step of their value chain as well as their internal expertise and external partnerships An Integrated Report provides a clear and comprehensive how these challenges and opportunities impact strategy

8 Value Creation in the Insurance Industry

9 Investors View Investors judge the information disclosed by insurance companies as more descriptive than strategic, in particular on Corporate Social Responsibility (CSR) policies. Even though CSR topics are becoming more and more detailed in insurers existing reports (annual or sustainability), they are still not adequately integrated with their whole performance. Also, companies focus on specific themes with quantitative performance indicators and do not sufficiently present their strategy in the form of long-term impacts on the business models.

10 How does <IR> help Insurers Draw a Clear Picture of Value Creation? Material challenges and trends the insurance industry currently face have a deep impact on companies business models, value creation and decision making process. Integrated Reporting better explains how these trends impact insurers business models not only over the next reporting period but also in the long-term. Better connects risks and opportunities to provide a holistic and integrated approach to insurers risks and opportunities management.

11 <IR> Insurance Network The <IR> Insurance Network extends the work of the <IR> Business Network, bringing together insurers and re-insurers, and enabling them to focus together on the aspects of applying <IR> particularly relevant to the industry. Under the lead of Aegon, Generali and Mazars, over 15 participants from all over the world share best practice and experiences in order to support each other as they implement integrated thinking and reporting. Network participants join monthly calls, hearing from peers and experts in the fields to support their progress with implementing <IR>.

12 BlackRock 2017 Letter to CEOs Our primary focus is to ensure board accountability for creating longterm value BlackRock engages to understand a company s priorities for investing for long-term growth, such as research and employee development and long-term financial well-being We will be looking to see how your strategic framework reflects the impact of the past year s changes in the global environment

13 "We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans. BlackRock s corporate governance team, in their engagement with companies, will be looking for this framework and board review." Larry Fink, CEO, BlackRock "Efforts by the International Integrated Reporting Council to develop a framework for reporting value creation seem very much in-line with what Mr Fink is suggesting." Sandra Peters, Head of Global Financial Reporting Policy, CFA Institute

14 CalPERS (California Public Employees Retirement System) Governance Principles-Integrity of Financial Reporting Financial reporting plays an integral role in the capital markets by providing transparent and relevant information about the economic performance and condition of businesses. CalPERS is a strong advocate of reform that ensures the continual improvement and integrity of financial reporting. Integrated Reporting: Companies should provide for the integrated representation of operational, financial, environmental, social, and governance performance in terms of both financial and non-financial results in order to offer investors a better information set for assessing risk.

15 Integrated Reporting at JLL Quotes from Tom Roundell Greene, senior manager of reporting and communications for global sustainability at JLL To my mind, Integrated Thinking is the prize and Integrated Reporting is incidental to that The approach we re considering is to build sustainability thinking into the risk-management process and then understand how that carries through into the strategy-setting for the whole business By looking at a business in terms of the six capitals, sustainability becomes a core part of strategic thinking for businesses It should be noted, however, that <IR> is not a framework focusing on sustainability reporting, but was developed to support value creation in a wider sense

16 Integrated Reporting at Financial Services Company DBS The <IR> Framework allows us to delve into the underlying factors that are driving our balanced scorecard approach. For example, employee engagement is on the scorecard, but the material factors underpinning this include employee retention and management. Having identified that, we can think more concretely about the risks and opportunities, the KPIs and our initiatives to grow this resource. So our material matters have not changed that much, but our clarity on the material matters that underlie our balanced scorecard has changed, enabling us to articulate this better and measure more concretely.

17 Resources Integrated Reporting Examples Database Sharing real examples of leading practice in Integrated Reporting to help organisations on the <IR> journey The International <IR> Framework Providing the principles and concepts for organisations adopting <IR> <IR> Network Bringing together organisations worldwide to enhance the way they think, plan and report. examples.integratedreporting.org

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