Originally published in Investment Magazine (May 2018)
Asset owners are significant providers of capital to listed companies. There is a growing desire among individuals, NGOs and civil society for information about how asset owners manage the funds entrusted to them. I see this as an opportunity to shine a light on the important work asset owners do.
Australian asset owners have a long history of engaging with companies and voting their shareholdings to protect and enhance long-term value for their beneficiaries. Domestic super funds and institutional investors have a strong focus on the integration of environmental, social and governance (ESG) risks and opportunities into their investment decisions, based on a firm belief that these are financially material for long-term investors.
The Code will provide insights into a wide range of stewardship activities, including exercising voting rights, company engagement, monitoring asset managers and financial system advocacy. Reporting and disclosure requirements are embedded into the Code to promote transparency and accountability.
The Code has six key principles, which signatories must implement on an ‘if not, why not’ basis:
- Publicly disclose how they approach their stewardship responsibilities.
- Publicly disclose their policy for voting at company meetings and voting activity.
- Engage with companies either directly, indirectly (for example, via collective action or third-party providers) or both.
- Monitor asset managers’ stewardship activities.
- Encourage better alignment of the operation of the financial system and regulatory policy with the financial interests of long-term investors.
- Report to beneficiaries about their stewardship activities.
I believe that having a strong sense of purpose contributes to business sustainability. How asset owners protect and enhance long-term value for their beneficiaries is an essential part of their purpose. The Code will demonstrate the importance that signatories place on good stewardship, but more so, that their intentions are backed by credible action. This is a strong basis from which to build trust and set the tone for stewardship in Australia.
Louise Davidson, CEO, Australian Council of Superannuation Investors