Japan’s Government Pension Investment Fund (GPIF) has brought fixed income and alternative assets, such as real assets, under the umbrella of its stewardship principles for its external asset managers.
The fund, which first published guidelines for asset managers in 2017, last week posted revised guidelines on its website.
A spokeswoman for GPIF told IPE: “One of the main revisions this time is that we now ask all of our asset managers – not only equity managers but also fixed income managers and alternative asset managers – to exercise their stewardship responsibilities.”
By and large, the original principles have been retained, but GPIF has clarified its requirements in the revisions. There are still five broad principles.
First, relating to the corporate governance structure of asset managers, GPIF said all asset managers should adopt Japan’s stewardship code.
GPIF expects asset managers to explain how remuneration and incentive systems for executives and employees are aligned with GPIF’s interests.
On management of conflicts of interest involving asset managers, the fund outlined situations where there could be a conflict of interest. For example, it said that when exercising voting rights for companies with which the asset managers have a potential conflict of interest, such as their own company, the parent company, or other group companies, asset managers should develop and disclose a process that removes arbitrariness.
“This is in line with best practice in corporate governance and conflict of interest management, such as letting their third party committee make voting decisions, or examine the validity of its own decisions,” it said.
The third option is to follow the recommendations of a proxy voting advisor.
On policy for stewardship activities, including engagement, GPIF’s revised principles have expanded to include four additional points. Among these is that “asset managers should integrate stewardship and investment”.
The guidelines added: “Asset managers should engage with various stakeholders, including regulators, stock exchanges, investee companies and index vendors, so as to improve the sustainability of the markets in which they and GPIF invest.”
GPIF expects asset managers of passive equity investment mandates “to develop and effectively implement a corporate engagement strategy to promote the sustainable growth of the market”.
On environmental, social and governance (ESG) integration into the investment process, GPIF has not changed its broad principles as to what it expects its asset managers to do, but it reiterated they should be signatories of the United Nations’ Principles for Responsible Investment and “participate in other industry ESG initiatives”.
Similarly, on the exercise of voting rights, GPIF has largely left unchanged its principles first published in 2017.
On proxy voting, it said asset managers should develop a policy and guidelines “that will contribute to the maximisation of shareholders’ long-term interests”.
“Asset managers should periodically review their voting records and conduct self-assessments,” it said.
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