who and what does the stewardship code apply to?
There are multiple opportunities for stewardship in investment management. See these opportunities here.
To whom does the Code apply?
Asset owners – such as trustees of superannuation schemes, foundations, endowments, charities, family offices, community trusts, insurers, corporates, local government funds and Crown financial institutions.
Asset / fund managers – including licensed managers of registered Managed Investment Schemes (MIS), such as KiwiSaver providers, as well as managers of wholesale schemes.
Discretionary Investment Management Service (DIMS) providers – where clients have given the provider the discretion to make investment decisions on their behalf.
Financial advice providers are also eligible to become Signatories.
To which investment markets can the Code apply?
Signatories should use the resources, rights and influence available to them to exercise stewardship, no matter how capital is invested.
This Code can be applied in both public and private markets. The initial expectation is that Signatories will be investors in public markets. However, investors in private markets are encouraged to become Signatories, noting their arguably greater ability to deliver on the goals of effective stewardship.
To which asset classes can the Code apply?
This Code recognises that capital can be invested in a range of asset classes over which Signatories have different terms and investment periods, rights and levels of influence. For example, traditionally stewardship has been active in equities. However, investments in fixed interest and other asset classes, such as private equity or infrastructure assets, can also play a key role in achieving the goals of effective stewardship.
Accordingly, this Code is expected to be applied across all asset classes, including listed and unlisted equities, fixed income, infrastructure, forestry, rural land, real estate etc. It is also expected to apply to both the active and passive management of assets.
Signatories should consciously avoid a ‘home bias’ when considering the geographic scope of investments and should extend their stewardship activities beyond domestic issuers (i.e., Signatories are expected to apply stewardship both internationally and domestically).
How does an asset owner who delegates to a fund manager(s) apply the Code?
Asset owners and fund managers cannot delegate their responsibility and are ultimately accountable for achieving the goals of effective stewardship.
Where an asset owner delegates investment decisions (management of securities) to a fund manager, the asset owner retains ultimate accountability with the fund manager responsible for undertaking stewardship in accordance with the asset owners’ policies.
Asset owners should set stewardship and reporting expectations (such as voting principles, engagement themes) for their delegated fund manager(s) and include stewardship requirements in their investment management agreements. They may also choose to exercise their own voting rights or engage directly with investee companies.
What about Service Providers?
At this stage, the Code does not directly apply to service providers such as investment consultants, proxy advisors, data and research providers, custodians and supervisors. They may be included at a later stage as the Code becomes more embedded (as has been the case in the UK).