The good news is that we have much to be proud of, both in terms of our stewardship with listed companies and our engagement with the market on key Environmental, Social And Governance (ESG) issues aimed at strengthening our shareholder rights (examples of these successes can be found on our website in our previous annual reports).

That said, there is still much to be learnt and we’re working hard to spread clarity and understanding, beginning with answering some of the most common questions we encounter …

What exactly is stewardship?

Stewardship represents the science of meaningful corporate engagement and aims to promote ESG management practices that encourage long-term value creation for shareholders. Considering the intersection between all the various types of ESG investment strategy – whether an integration, values or impact approach to investment decision-making –  active ownership is at the centre, regardless of the approach; as illustrated in the below diagram.

No matter what ESG strategy is employed, stewardship is central to delivering long-term outcomes. Globally, we have seen an increasing number of large asset owners consolidate their stewardship activities to ensure a consistent outcome. South Africa is no different and we expect more active investors, bigger societal voice and stronger legislative enforcement, to support greater demand for stewardship services. 

OMIG’s engagement activities with companies focus on key strategy and performance issues such as: remuneration policy, climate change, audit quality, board succession, corporate governance, risk management, privacy and data security, to name a few. In 2019 alone, we interacted with 31 companies on 93 material ESG issues. 

Why should investors care about stewardship and what solution does OMIG offer?

We are seeing more and more evidence from eminent researchers showing increased performance from successful stewardship activities that are collaborative – with a domestic lead engager and global supporting investors, and with participation from large pension funds/long-term capital entities (Dimson, Karakas and Li, 2015 and 2020). In addition, practicing effective stewardship empowers clients to take action in respect of key ESG issues affecting their listed equity holdings. The benefit of doing so is lowering the ESG risk in their portfolio and driving positive change, both at a company level and in supporting the development of long-term market resilience. 

With these benefits in mind, we have recently launched our Listed Equity Stewardship service to “crowd in” like-minded collaborative engagement participants, making the industry-competitive stewardship service at OMIG an agent of change on the part of corporates in collaboration with other asset managers for overall change in the market.

The benefits enjoyed by clients therefore include access to an experienced OMIG team that actively stewards assets in a consistent and transparent manner for scalable impact. Portfolio level reporting is enhanced in order to meet FSCA requirements in terms of the recently published Guidance Notice 1 of 2019. In addition, our listed equity stewardship clients are able to evidence their commitment to responsible investment practices. 

What is the total opportunity?

The global investment ecosystem represents US$91 trillion, of which currently about a third (at US$31 trillion) is managed in some form of ESG strategy, as of this year. Therefore, there is still a great opportunity to develop stewardship practices on a global scale. With approximately R300 billion in listed equity under management and recent additions of third party stewardship capital via our listed equity stewardship service, we are excited by the potential opportunity our listed equity stewardship service has to effect real change and impact in the South African market and beyond.

Looking ahead, we will work tirelessly to bring many more engagements to a successful close and allow all our listed equity clients to receive the benefit of a stronger market system, better investment performance and more voices heard on material ESG issues that impact their portfolios. BM

To answer more of your investment related questions, contact us at [email protected] or visit https://www.oldmutualinvest.com/institutional/knowledge-room/media-and-insights for more news and insights.