UK Stewardship Code gains backers, a few from abroad

The UK Financial Reporting Council wants a head of steam behind its Stewardship Code concerning how institutional investors engage with the corporations in which they invest. Launched in July to a mixture of fanfare and scepticism, the code asks investment funds to abide by a set of principles that aim at promoting the long-term growth of companies fostered by active dialogue with investors. Investors, it says, should act like owners, not commodity traders. Many of the usual suspects is on the list of firms adhering to it. A few – but only a few – come from outside the UK, and they too might be called usual suspects: CalPERS, the California state pension plan is one. It's a long-time activist investor noted for its engagement. Capital International, the London subsidiary of the US-based giant Capital Group is, too. It engages in a different way from CalPERS, but it's a regular on the scene. In all, 68 institutions have published statements of support: 48 asset managers, 12 asset owners and eight service providers. Baroness Hogg, the FRC chairman, said, perhaps somewhat optimistically: "A critical mass of investors is coming through and this is a very important first step. Not only do we wish to see these numbers increase, but we also want to see a better integration of governance and investment processes that will be vital in ensuring effective implementation of the Code. In that respect, actions will speak louder than words."

There are less familiar names, as well. Here's the response of one of them, Pyrford Investments, to the first of the Stewardship Principles:

Principle 1: Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

The Pyrford investment process requires that the management of any potential investee company is visited prior to a decision to invest. Any company in which we are invested is then revisited at least once a year. The purpose of these meetings is to determine the potential for changes in earnings over Pyrford’s five year investment horizon. However, particular focus is given to the way companies interact with all of their stakeholders (customers, employees and shareholders) to ensure that all are treated fairly and a positive relationship is maintained with the company.  

Impressive, but not the stuff of the rapacious hedge funds whose actions are so often seen to threaten a company's focus on long-term objectives in face of demands for short-term performance. Time will tell how well stewardship develops.

Source document: The lists of backers will be updated as others join.