18 October 2023

Investors: Are you ready for the new Swiss Stewardship Code?

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  • Banking / Insurance
  • Governance / ESG

Investors: The Swiss Stewardship Code provides a guide for sustainable investment and collaboration with companies. It's not mandatory, but it's valuable.

The Asset Management Association Switzerland and Swiss Sustainable Finance have issued the Swiss Stewardship Code, providing guidance for the broad integration of stewardship activities in the business models and investment processes of asset owners, asset managers and service providers.

Is this a new binding regulation? No, but even though non-binding, all asset owners, asset managers and service providers should familiarize themselves with the newly published Swiss Stewardship Code (Code).

What is Stewardship? “Stewardship (or active ownership) is a responsible investment approach by which investors collaborate and interact with investee entities to generate long-term financial, environmental and societal value, and to reach positive and long-term sustainable outcomes.”

Who does the Code apply to? The Code applies to Asset Owners, Asset Managers (in short Investors) and Service Providers and outlines their role in the stewardship context.

What does it cover? The Code describes 9 principles for effective stewardship as summarized in the following.

Principle 1: Governance

Investors and service providers integrate stewardship into their investment management and/or working models with the objective of creating long-term value for clients and other stakeholders. Board leadership, appropriate oversight and regular review of governance practices are essential for effective stewardship.

Principle 2: Stewardship Policies

Investors and service providers develop effective stewardship policies. They should also actively communicate their policies to investee entities as part of their ongoing dialogue.

Principle 3: Voting

Investors and service providers commit to active and informed voting. Voting activities of investors and service providers should be consistent with their own stewardship policies.

Principle 4: Engagement

Investors and service providers engage in an active dialogue with investee entities with the aim of generating long-term financial and societal value. Investors and service providers are free to decide whether to engage individually and/or collaboratively and whether to conduct public policy engagement. In all cases, investors and service providers should describe which type of engagement they decide to be active in.

Principle 5: Escalation

Investors and service providers escalate their stewardship activities to encourage investee entities towards generating long-term financial, environmental and societal value. In particular, engagement escalations steps may include voting against a specific agenda item (e.g. against a specific board member), voicing concerns to non-executive directors or corporate representatives, either directly, or in written form, or during annual general meetings.

Principle 6: Monitoring of Investee Entities

Investors and service providers regularly monitor investee entities to track, assess and review the effectiveness of their stewardship activities. In assessing the listed investee entities’ long-term value generation opportunities, risks and strategy, it is critical to consider, besides financial information, environmental, social and governance information.

Principle 7: Delegation of Stewardship Activities

When delegating stewardship activities, investors ensure consistency of the delegated activities with their own investment beliefs, stewardship policy and strategy. If an investor is unable to exercise stewardship activities directly, it should make an arrangement to ensure that its asset manager or external service provider is undertaking these activities on its behalf.

Principle 8: Conflicts of Interest

Investors and service providers manage conflicts of interest in the best interests of their clients. Stewardship policies should address how matters are handled in case of conflicts of interest (including appropriate escalation process) and what measures are taken to minimize or avoid them.

Principle 9: Transparency and Reporting

Investors and service providers disclose and report their stewardship policies and activities to their clients and beneficiaries. Investors should provide a review of the stewardship activities of their reporting year. The focus should be on activities and outcomes, providing external readers with relevant information on how the stewardship activities are carried out.

We at MME are available to support you in implementing these 9 stewardship principles into your policies and governance framework.