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. 

We believe ACSI members and other asset owners in Australia make a significant contribution to good stewardship. However, we recognise that more can be done to reassure people about the robustness and effectiveness of these activities. That’s why ACSI and our members, in consultation with a range of external stakeholders, have developed the Australian Asset Owner Stewardship Code (Code).
 
Stewardship codes exist in over 25 markets around the world, including the United Kingdom, United States, Japan, Hong Kong and South Africa. European and global stewardship principles have also been established and a fund manager stewardship code in Australia. However, this is the first code to focus exclusively on the activities of Australian asset owners. 

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: 

  1. Publicly disclose how they approach their stewardship responsibilities.
  2. Publicly disclose their policy for voting at company meetings and voting activity.
  3. Engage with companies either directly, indirectly (for example, via collective action or third-party providers) or both.
  4. Monitor asset managers’ stewardship activities.
  5. Encourage better alignment of the operation of the financial system and regulatory policy with the financial interests of long-term investors.
  6. Report to beneficiaries about their stewardship activities.
 
Signatories will be required to publish a Stewardship Statement on their website which describes how they apply these principles or, if one or more of the principles has not been adopted, explain the reasons for this. ACSI will maintain a list of signatories on our website, including a link to their Stewardship Statement and contact details for queries. 

The Code is voluntary and all asset owners are encouraged to sign up. Although it has been developed for asset owners (such as superannuation funds, endowments and sovereign wealth funds), we encourage other institutional investors to apply it. We are happy to hold discussions with asset owners who are interested in signing up – requests can be directed to This email address is being protected from spambots. You need JavaScript enabled to view it..  

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