Markets in Asia Pacific need to promote Stewardship codes and practices: Survey

Stewardship in investment management is generally understood as engagement by institutional investors with public companies to generate long-term value for beneficiaries, although specific definitions and principles differ across markets.According to the survey by CFA Institute, the global association of investment management professionals, 42 per cent of all respondents rated themselves as having little or no understanding 1 or 2 on a 5-point scale of stewardship codes in the markets in which they invest, while only 28 per cent said they understood them well or very well.

The level of awareness of stewardship codes among institutional investors in the Asia Pacific region remains low and needs to be increased, according to a survey. Stewardship in investment management is generally understood as engagement by institutional investors with public companies to generate long-term value for beneficiaries, although specific definitions and principles differ across markets.

According to the survey by CFA Institute, the global association of investment management professionals, 42 per cent of all respondents rated themselves as having little or no understanding (1 or 2 on a 5-point scale) of stewardship codes in the markets in which they invest, while only 28 per cent said they understood them well or very well. Less than half of investors (47 per cent) said they considered stewardship principles when making investment decisions.

The survey covered 270 respondents from APAC region and the results were fairly representative of the situation in the region. There were no standalone respondents from India. The survey was conducted in October 2019. The report highlights the need for a better understanding of the benefits of stewardship, and the role stewardship codes play in promoting sound investment governance practices and in the advancement of environmental, social and governance (ESG) principles.

''Sebi's mandate on Stewardship code for mutual funds and AIFs is intended to generate long-term value for their clients through engagement. Better and more transparent engagement between institutional investors and issuers can result in improved operating and financial performance and a high confidence in public markets,'' said Vidhu Shekhar, CFA, CIPM, Country Head, India, CFA Institute said. To improve effectiveness, 62 per cent of investors indicated a preference to have a regulatory body as a supporter and overseer of stewardship codes and 49 per cent believed that the comply-or-explain model provided a sufficient level of oversight and enforcement.