By: Jana Van Rooijen, Responsible Investment Specialist, Momentum Investments
Stewardship means taking ownership – acting as an owner of an asset. This involves using your legal rights by either engaging and voting with investee companies or by engaging with the appointed investment managers who are managing mandates on your behalf.
The importance of stewardship applies to all types of asset classes because the principle of taking ownership is universal. As a responsible investor, you need to understand what you’ve invested in and address ESG-related matters to protect your investment, regardless of the nature of the asset you own.
Exclusionary policies, negative screening or divesting from entities are not popular strategies among South African investors. The small, concentrated and declining investable listed universe in South Africa is challenging to all types of investors with or without exclusionary policies. Additionally, there is the imperative to invest in opportunities linked to the Just Transition, which means that investors’ most valuable mechanism to navigate through the ESG risk landscape is through sound stewardship principles.
Our proxy voting and engagement policies serve as guiding frameworks as we use our investor rights to make decisions and work towards sustainable outcomes with our investee companies. Transparency enables higher-quality conversations between the engaging parties, allows for management accountability, and ensures well-informed proxy voting decisions. In turn, investors also must be transparent with their clients and ensure actions are evidenced in their Stewardship Report and published voting records on their website.
Within the listed space, we believe that full participation is necessary to make a difference. Therefore, we vote on all company corporate resolutions (regardless of our percentage holding in the company) and never abstain, unless there is conflict of interest. Collectively investors have the potential to make a positive impact on the sustainable outcome of South African companies.
As a signatory to the United Nations-supported Principles for Responsible Investing (PRI), we pre-declare our voting actions of the top-20 shares, by benchmark weight of the FTSE/JSE All Share Index (ALSI), where we have exposure, on the PRI pre-declaration platform. The intention is to be transparent in our motivations and advocate to other investors what we believe is best practice.
When engaging with company management teams, we take a focused approach, selectively engaging with companies where we are deemed material investors. Engagement topics will link to the ESG-focused themes we have committed to addressing as a company.
Collaboration initiatives are necessary, especially if you are not a material investor in a company. We are signatories to the Climate Action 100+ initiative and serve on the Eskom and Sasol engagement groups with other investors, which helps us to be part of critical conversations. As stewards of the assets invested in either fund of hedge funds or multi-managed portfolios, we understand the breadth of our influencing sphere and its limitations.
Regardless of the investment vehicle type, whether it be a reinsurance agreement, unit trust, or a pooled or segregated mandate, there is always some progress to be an active owner and effect positive influence.
Our segregated investment mandates include responsible investment clauses that link to our responsible investment policy and advise that we will vote according to our proxy voting policy.
Through our commitments to the sustainable development goals (SDGs), our teams have committed to engage with their appointee managers to encourage them to publish their climate change investment policy. We believe that a policy within an organisation should have oversight and hopefully become a positive stepping stone to climate progress and alignment with our journey.
Alternative investments such as infrastructure, real estate and private equity create a stewardship-friendly environment for investors through partnership and direct co-investment arrangements offered in these investments.
These investment vehicles allow for closer involvement by allowing us to serve on the advisory board, advisory committees or attend shareholder meetings. Within the private equity landscape, side letters are another mechanism that allows investors to specify ESG guidelines.
One of the key learnings from our SDG initiative was that the simple request for data or queries around policy often resulted in positive relationship-building engagements.
We focus on building relationships with our various types of investees, using the opportunity to engage and explain why we stand by our principles. We also acknowledge that we are continuously on a journey to improve our responsible investment practices, which is essential for delivering sustainable returns to our clients.
The principle of stewardship is fundamental to our RI practices. We are obligated to achieve positive change and improve the sustainable outcome of our investments.
For more information on our Stewardship practices, you can visit our website here.
