New US Investor Stewardship Group – now backed by $22trn of assets – readies for 2018 launch

ISG is a market attempt to create the first US Stewardship and Governance Code

The Investor Stewardship Group, the new corporate governance collective that is backed by investors with around $22trn in assets and which is aiming to create the first US Stewardship and Governance Code, is preparing for its framework to take effect at the start of next year — in time for the 2018 annual meeting season.

The initiative is backed by some leading asset owners and fund management firms (see below).

It was first unveiled in January this year (with $18trn of assets backing at the time) as what was termed a “historic, sustained initiative” to establish a framework of basic standards of investment stewardship and corporate governance for institutional investor and boardroom conduct.

As if to convey the importance of the launch, the group has a countdown to the implementation of the new principles on its website. Twenty-four days and counting…

In the latest statement ahead of its launch, signatories are encouraging companies to articulate how their governance structures and practices align with the ISG’s Corporate Governance Principles and where and why they differ in approach.

ISG signatories believe companies can best decide on how and where to disclose their alignment with the Principles, for example, through investor relations, boards of directors or corporate governance websites, or in other investor outreach/engagement materials.

“The ISG is advocating for communication – not a tick-the-box compliance exercise,” said CalSTRS’ Director of Corporate Governance, Anne Sheehan. She said discussions over the past year have given a better perspective on how the ISG can be most effective in the US.

The group acknowledges that individual members may differ on specific standards, as outlined in their own proxy voting policies/guidelines, regarding corporate governance practices that are expected of companies.

The framework is not intended to replace or supersede existing laws and regulations or listing rules.And aligning with the framework is not a substitute for direct engagement between companies and investors on matters of mutual interest.
It comes as a separate shareholder engagement group has been launched in Europe this week. Shareholders for Change aims to consolidate engagement efforts on ethical issues.

Meanwhile, Legal & General Investment Management (LGIM) is reportedly calling on non-executive directors in companies in takeover situations to obtain independent advice to ensure they don’t destroy shareholder value. Reuters quoted LGIM’s governance head Sacha Sadan as saying he made the request to around 80 board members at a recent event hosted by LGIM. And he said a key area of engagement with companies next year was likely to be climate change. ISG Home Page.

ISG Asset Owner Signatories:

Illinois State Board of Investment
Oregon State Treasurer
The Florida State Board of Administration
State Universities Retirement System (SURS, Illinois)
University of California
Ohio Public Employees Retirement System
Washington State Investment Board

ISG Asset Owner Endorsers:

Four Swedish AP funds (AP1, AP2, AP3 and AP4)
Australia’s Future Fund
GIC (Singapore)

Asset Manager Signatories (selected):
Blackrock, JP Morgan Asset Management, MFS, Northern Trust, TIAA Investments

Asset Manger Endorsers (selected):
Aberdeen, Hermes Investment Management, Legal & General Investment Management, NN Investment Partners, Robeco, HSBC Global Asset Management, UBS