Initiative aims to foster good investment practices

Investor community and financial industry draw up guiding principles on stewardship

The investor community and financial industry have come together to create a set of principles that encourage responsible investment practices here.

The Singapore Stewardship Principles (SSP) initiative, led by the Stewardship Asia Centre (SAC) think-tank, has outlined seven of these guiding principles.

The principles are supported by the Monetary Authority of Singapore (MAS) and the Singapore Exchange.

For example, the principles urge investors to show transparency in managing conflicts and fund managers to communicate regularly with the firms they invest in.

Fund managers are also urged to actively monitor the companies they invest in, and to exercise their voting rights on an informed basis.

They should also document and provide relevant updates on their stewardship activities and work with other investors to engage responsibly with one another where appropriate.

These principles of stewardship - behaviour that ensures the long- term future of companies and stakeholder benefits - were drawn up after an 18-month conversation with the investor community, SAC chief executive Ong Boon Hwee said yesterday in announcing the initiative.

ROOM FOR IMPROVEMENT

There is always talk about investor rights, but much less focus on investor responsibility. We believe there is scope to foster a more proactive mindset among investors as stewards of companies.

SAC CHIEF EXECUTIVE ONG BOON HWEE

"There is always talk about investor rights, but much less focus on investor responsibility. We believe there is scope to foster a more proactive mindset among investors as stewards of companies," he told The Straits Times.

"By emphasising the spirit of stewardship and letting it go hand in hand with the existing corporate governance code, we can help improve the governance standards and ensure long-term shareholder value."

The principles are not prescriptive and will not be made into rules because the SAC and its partners - including the Institute of Singapore Chartered Accountants, Singapore Institute of Directors and Securities Investors Association - want this to be a voluntary cultural shift.

"The principles are not intended to be rules for compliance, and we will not be conducting audits. We don't want this to become a box-ticking exercise where people do things just to follow rules - that will defeat the purpose of these principles,'' Mr Ong added.

A total of 38 asset manager and investment companies have pledged their support for the initiative. These include Aberdeen Asset Management, BlackRock, JPMorgan Asset Management and Temasek Holdings. The SAC is part of the Temasek Management Services Group.

An MAS spokesman said: "Effective stewardship by shareholders is an important complement to strengthening corporate governance. Shareholders, in particular institutional investors, can now take guidance from the SSP in their engagements with companies' boards and management."

Temasek noted: "It is a timely initiative by the industry to articulate guiding principles for stewardship and corporate governance that are relevant to Singapore.''

BlackRock Singapore country head Kevin Hardy also welcomed the initiative, saying: "As a firm focusing on long-term investments, we believe that such principles encourage business and management practices that support sustainable financial performance in the long run."

Yesterday's launch will be followed by outreach programmes that the SAC and its partners are planning, starting with a Nov 18 event organised by the Investment Management Association of Singapore.

Mr Ong said that while the initiative is mainly targeted at asset managers, there are also plans to reach out to retail investors.

A version of this article appeared in the print edition of The Straits Times on November 03, 2016, with the headline 'Initiative aims to foster good investment practices'. Print Edition | Subscribe