UK Stewardship Code 'will not change investment industry' – First State
GLOBAL - First State Investments has not signed up to the UK Stewardship Code, despite integrating environmental, social and governance (ESG) factors into its investment processes across the world.
Amanda McCluskey, head of responsible investment at First State Investments in Sydney, told IPE: "We have not signed the Stewardship Code because we do not think it will change the industry. We want harder questions, we need to be challenged, and we have to do something more than simply signing up to the code."
McCluskey, however, praised the success of the UN Principles for Responsible Investment (PRI), which the asset manager has embedded across its investment teams globally.
But there are still gaps to fill. She said the investment industry needed to get together to clean up its act, even suggesting that investors take a sort of Hippocratic oath.
"We have to learn from the mining companies as to what happens when you fail to engage with your stakeholders - the licence to operate is taken away," she said.
"The continued short-termism - the average holding period has fallen from seven years to seven months over the last 35 years - and hesitancy to change the way capital is allocated jeopardises the finance sectors' own licence to operate. The industry also has to think about how to recruit the right people."
In an attempt to undertake a programme of cultural change and combat short-termism, First State Investments is gradually moving the performance measurement of senior investment professionals from 12 months to rolling three-year periods.
McCluskey also said ESG was largely about active investment because, besides engagement overlays and voting, passive investors were restricted as to what they could do in terms of ESG integration.
At present, the biggest ESG issues in developed markets, according to McCluskey, are carbon emissions and climate change, whereas energy efficiency and water are a concern in developing countries.
Human capital is a social issue across the world, as are the business ethics of the finance sector.
First State Investments launched its fifth annual Responsible Investment Report in London yesterday.