Approach to stewardship

Stewardship aims to promote the long term success of companies in such a way that the ultimate providers of capital also prosper.

Effective stewardship benefits companies, investors and the economy as a whole. In publicly listed companies, responsibility for stewardship is shared. The primary responsibility rests with the board of the company, which oversees the actions of its management. Investors in the company also play an important role in holding the board to account for the fulfilment of its responsibilities.

The UK Corporate Governance Code identifies the principles that underlie an effective board. The UK Stewardship Code sets out the principles of effective stewardship by investors. In so doing, the Code assists institutional investors to exercise their stewardship responsibilities, which in turn gives force to the “comply or explain” system.

For investors, stewardship is more than just voting. Activities may include monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure, and corporate governance, including culture and remuneration. Engagement is purposeful dialogue with companies on these matters, as well as on issues that are the immediate subject of votes at general meetings.

NILGOSC supports the principles set out in the Stewardship Code and seeks to promote these principles both directly and indirectly through the mandates given to its investment managers. In order to demonstrate effective stewardship of the companies in which it invests, NILGOSC has published a Statement of Adherence to the Stewardship Code and also requires its Fund Managers to provide copies of their Statements of Adherence.

The UK Stewardship Code was substantially revised in 2019 and the new UK Stewardship Code 2020 took effect from January 2020.  The new code focuses on the activities and outcomes of stewardship, not just policy statements, and signatories will be required to produce an annual Stewardship Report explaining how they have applied the Code in the previous 12 months.  NILGOSC plans to produce its first annual Stewardship Report in 2021.