One of Asia's most forward-thinking asset owners, New Zealand Superannuation Fund, is showing the way on how to become more transparent through improved disclosure norms.
On Monday (March 11), the fund announced on its website that it had complied with its obligation to publish records of how it voted at annual general meetings of the listed companies it invests in.
The fund is a signatory to the Principles of Responsible Investment (PRI) supported by the United Nations, and disclosing voting actions is a part of the broader obligations under these principles.
Anne-Maree O’Connor, head of responsible investment at NZ Super, said the aim of making their voting public is to demonstrate how the fund’s votes reflect “the essential elements of good governance: transparency, board alignment with shareholder interests, long-term strategy, appropriate remuneration, business ethics and shareholder rights.”
As Asian investing institutions tighten their corporate governance rules and gradually adopt global reporting standards on ESG issues, it is reasonable to expect higher levels of disclosure on their voting behaviour in AGMs in coming years.
Overall, an asset owner’s voting policy is increasingly guided by international standards such as the International Corporate Governance Network's (ICGN) Global Governance Principles, the G20/OECD Principles of Corporate Governance and the United Nations's PRI.
In the case of NZ Super Fund, the new development means stakeholders can now see the fund’s voting data by country and company right down to individual resolutions.
The fund has shares in around 6,000 listed companies globally. Most of the global equity investments are passively held.
For engagement on the global portfolio, the fund relies on its passive managers such as BlackRock, State Street and Northern Trust, all of whom have considerable resources focused on corporate governance engagement. In addition, the fund also outsources a portion of its engagement to service provider Bank of Montreal.
The fund’s NZ$1.8 billion ($1.2 billion) of domestic listed equity investments are actively managed via mandates run by Devon Funds, Mint Asset Management and the fund’s in-house team.
Voting on the domestic listed equities is handled by the in-house team and the external managers.
AWARENESS IN ASIA
While it's true that most Asian institutions lag their global counterparts on the responsible investing front, NZ fund executives believe the momentum for change is gradually building across the region.
Katie Beith, senior investment strategist on the responsible investing team at NZ Super, told AsianInvestor that due diligence process requirements around environment, social and governance (ESG) reporting are intensifying all the time. Now, there are even new initiatives from the International Accounting Standards Board (IASB) aimed at helping industry consultants develop expertise in corporate governance reporting, she added.
Stock exchanges in Malaysia and Hong Kong are also demanding more disclosure on sustainability before public listings, she noted. “In Thailand, the stock exchange has carried out a series of sustainability-related workshops as part of its Sustainable Development Forum."
In Thailand, the $21 billion Government Pension Fund recently signed up to the PRI. The pension fund was instrumental in the development of the local stewardship code, but none of the other Thai institutions have indicated a willingness to following GPF’s lead and sign up to the PRI, according to GPF’s deputy secretary general of fund management, Yingyong Nilasena.
"There’s a lot of work to do when you sign up,” he told AsianInvestor. “The PRI expects you to act on the principles and report back to them on your progress. That’s why other investment institutions might be reluctant to join.”
By signing up to the PRI, institutions uphold that their primary duty is to act in the best long-term interests of their beneficiaries and that ESG factors can affect the performance of their investment portfolios.
Elsewhere in Asia, the only other asset owners that have signed up to the PRI are two Indonesian funds, Persero and Kehati; the National Pension Service in Korea; and Kwap and Khazanah in Malaysia.
Neither of the Malaysian funds has so far complied with the requirement to go public with voting decisions.
Sovereign wealth fund Khazanah’s website has a dedicated corporate governance section, outlining the six PRIs, but states, “Khazanah is currently putting in place the relevant policies and frameworks for Principles 5 and 6,” which relate to incorporating the principles into their investment decision-making process and publishing their voting policy.
Meanwhile, Kwap, Malaysia’s pension fund for civil servants, makes no mention of its PRI obligations on its website.
In Indonesia, state pension fund Persero’s website has extensive information on corporate governance and environmental policy, but no details on voting so far. The website of the Indonesian Biodiversity Foundation, or Kehati, has a lot of information on environmental protection, but is silent on the topic of corporate governance.
Korea’s NPS does not mention its corporate governance obligations on its website either.