The NAPF Stewardship Policy gives pension funds a clear roadmap of how they can address their stewardship responsibilities. It sets out six best practice principles that the NAPF advises its members to follow. These include setting mandates for their asset managers which explicitly cover stewardship responsibilities and reporting to the members of the pension schemes on how their policy has been implemented.
The policy will be launched at the NAPF Corporate Governance Conference today, where Vince Cable MP, the Secretary of State for Business, Innovations and Skills (BIS), will be delivering a keynote address on responsible capitalism. It explains why and how pension funds should back the Code, and also takes forward recommendations set out by the Kay Review on short-termism.
The Stewardship Code, which was launched by the Financial Reporting Council (FRC) in 2010 to improve engagement between institutional investors and companies, has already been signed up to by 57 asset owners, including many of the UK’s larger pension funds, and 189 asset managers. The NAPF is hopeful that more funds will follow in the coming year.
Joanne Segars, NAPF Chief Executive, said:
“Governments and regulators, both in the UK and Europe, want institutional investors to be at the forefront of the movement towards a new ‘responsible capitalism’. In the UK pension funds are already playing their part by encouraging more effective corporate governance at the companies in which they invest.
“The Stewardship Code is important, and a significant number of pension funds have signed up to it. But more need to do so, especially in light of the recent revisions to the Code, which put greater emphasis on the role of asset owners.
“The NAPF has prepared a policy that will help pension funds understand and fulfil their responsibilities as investors and to become signatories to the Code.
“While the primary responsibility for stewardship activity lies with funds’ asset managers, pension funds remain accountable to their members. We expect them to have a stewardship policy, to select investment managers based upon their stewardship policies and activities, and to hold those managers to account.
“Having a larger number of pension fund signatories to the Code will strengthen the links between owners, asset managers and companies, leading to better stewardship. Ultimately, it is in the interest of all pension funds that the companies in which they invest are well governed. We are confident that more will back the Code in the coming year.”
The NAPF policy also features an implementation questionnaire and short guidance to help pension funds sign up to the revised Code.
The Stewardship Code aims to improve engagement between institutional investors and companies to help enhance long-term returns for shareholders, and to ensure the efficient exercise of governance responsibilities. While the original version of the Code was primarily directed at asset managers, the Code was revised in October this year to put greater emphasis on the role played by asset owners such as