The NZ asset ‘stewardship code’ inked last week by seven foundation signatories goes beyond global counterparts to include broader stakeholder representation, according to the group’s website.
“Most international codes focus on stewardship only as between an asset owner or fund manager and an issuer, whereas this Code includes consideration also of clients, beneficiaries, and policy makers,” the Aotearoa NZ Stewardship Code site says.
Launched to a crowd of some 350 delegates at the Responsible Investment Association of Australasia (RIAA) last week, the new code will hold signatories to nine principles designed to instill and grow asset stewardship through the NZ industry.
The concept of investment stewardship has taken off in recent years – with a similar code published in the UK in 2020, for example – under various definitions.
However, the NZ code body describes stewardship as “the responsible allocation and management of capital by investors – including asset owners and fund managers – to create and preserve long-term value for current and future generations”.
“Stewardship also promotes sound investor and issuer governance, and business practices that lead to sustainable outcomes for our environment, society, and economy,” the website says.
In practice, signatories will have to complete an annual report detailing compliance with the nine principles, to be audited by the Code Governance Committee and the secretariat (a joint project of RIAA and Toitū Tahua Centre for Sustainable Finance).
While most signatories play in the listed markets, the code encourages asset owners and investors in private markets to sign on, noting “their arguably greater ability to deliver on the goals of effective stewardship”.
“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,” the website says. “They may be included at a later stage as the Code becomes more embedded (as has been the case in the UK).”
Despite some concerns that the voluntary code would duplicate existing compliance burdens, the launch document says the new duties would strengthen current environmental, social and governance (ESG) practices and reporting.
“Signatories already have duties to exercise care, diligence and skill in their investment decision-making, duties to comply with relevant professional standards of care, and fiduciary duties to act in the best interest of their clients and beneficiaries,” the document says. “The Code seeks to complement these existing legal obligations.”
Simon O’Connor, RIAA chief, said in a statement that the code brings NZ up to speed with the 20-plus jurisdictions that have launched similar stewardship programs.
“By shedding light on the conversations taking place between investors and investees, these codes work to increase accountability on both sides,” O’Connor said. “It’s easy for a fund manager to say that they’re doing a lot of engagement and voting, but unless they lay it out in a report that shows what some of the outcomes are and gives case studies, then it can be prone to a form of greenwashing.”
Devon, Harbour, Kiwi Wealth (now part of Fisher Funds), Milford, Westpac/BT, Trust Management and the NZ Superannuation Fund have signed on as founding code members – a status open to all those who join before December 28 this year.
The code will be reviewed in 2024 when all signatories also have to deliver their inaugural stewardship reports.