Integrated Reporting and Investor Clientele

George  Serafeim

Article | Journal of Applied Corporate Finance

Integrated Reporting and Investor Clientele

Abstract

In this paper, I examine the relation between Integrated Reporting (IR) and the composition of a firm's investor base. I hypothesize and find that firms that practice IR have a more long-term oriented investor base with more dedicated and fewer transient investors. This result is more pronounced for firms with high growth opportunities, not controlled by a family, operating in 'sin' industries, and exhibiting commitment to IR. I find that the results are robust to the inclusion of firm fixed effects, controls for the quantity of sustainability disclosure, and alternative ways of measuring IR. Moreover, I show that investor activism on environmental or social issues or a large number of concerns about a firm's environmental or social impact leads a firm to practice more IR and that this investor or crisis-induced IR affects the composition of a firm's investor base. Finally, firms that report more information about the different forms of capital or follow more closely the guiding principles as described in the IR Framework of the IIRC exhibit a more long-term oriented investor base.

Keywords: integrated reporting; sustainability reporting; long-term investing; Short-termism; corporate governance; accounting; Integrated Corporate Reporting; Environmental Sustainability; Investment; Corporate Governance;

Format: Print

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Citation:

Serafeim, George. "Integrated Reporting and Investor Clientele." Journal of Applied Corporate Finance 27, no. 2 (Spring 2015): 34–51.

Case | HBS Case Collection | November 2017 (Revised July 2018)

Summa Equity: Building Purpose-Driven Organizations

George Serafeim and David Freiberg

In 2015, Reynir Indahl left top Nordic private equity firm Altor Equity Partners to found Summa Equity (Summa). After long contemplation following the financial crisis, Indahl was convinced the financial system was producing negative externalities and that the current private equity model adopted by most firms would no longer be successful. Summa was developed under a new private equity model that sought to “future-proof” businesses by focusing on long-term value creation and growth, in addition to traditional private equity practices of implementing best practices and productivity improvements. To find businesses best suited for long-term growth with disruptive potential, Summa invested in four thematic areas that were mapped to megatrends outlined in the United Nations Sustainable Development Goals—trends Summa believed presented long-term growth opportunities for businesses that presented commercial solutions for these challenges. After a period of successful recruiting, fund raising, and deal completion, Summa needed to develop a set of practices and expectations across portfolio companies and partners. The case concludes with Indahl contemplating exiting Summa’s first company. What should Summa look for in a buyer? Is sale price all that matters, or should a potential buyer share Summa’s focus on building purpose-driven organizations with a positive impact on the world?

Keywords: corporate purpose; ESG; ＂ESG (environmental, social, governance) performance; social impact; social enterprise; private equity; investment management; finance; capital markets; management practices; leadership; innovation; entrepreneurship; Private Equity; Social Enterprise; Finance; Capital Markets; Management Practices and Processes; Innovation Leadership; Leadership; Innovation and Management; Entrepreneurship; Mission and Purpose; Financial Services Industry;

Citation:

Serafeim, George, and David Freiberg. "Summa Equity: Building Purpose-Driven Organizations." Harvard Business School Case 118-028, November 2017. (Revised July 2018.) View Details

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In 2017, JetBlue, the airline founded on the mission to “bring humanity back to air travel,” became one of the first companies to report performance according to the Sustainability Accounting Standards Board (SASB) standards and was first among airlines to adopt the recommendations of the Task Force for Climate-related Financial Disclosures. Despite operating as a smaller player in an industry dominated by few legacy competitors, JetBlue leadership saw themselves as a driver of industry progress. However, was JetBlue’s leadership “relevant sustainability leadership”? Moreover, how could developing metrics and improved performance on material sustainability issues be used as an instrument for change management? JetBlue wanted to achieve best-in-class performance on SASB metrics, as company officials believed sustainability was more than simply a risk mitigation tool. Was it? If so, how could JetBlue receive credit from investors, and competitors, for their sustainability leadership?

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Integrated Reporting and Investor Clientele

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