Specialist in Asia Pacific, China, India and South East Asia and Global Emerging Market equities.

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Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.

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What makes a good responsible investment policy?

When First Sentier Investors updated our responsible investment (RI) policy two years ago, we knew it wouldn’t be a ‘set and forget’ task. The policy includes a mechanism to be reviewed at least every two years - but two years is a long time in the ESG world, and our latest review led to a number of important updates to the policy and its underlying approach.

The background

In 2020, First Sentier Investors undertook a comprehensive review of our existing policy suite and developed a single policy which built on and improved our approach, the Global Responsible Investment and Stewardship Principles and Policy (“the policy”).

The document articulates our approach to RI and what it means to us, and includes a set of guiding principles for investment team members as well as specific commitments in relation to ESG integration, corporate engagement, proxy voting and investment screens. Through this policy we communicate our approach to systemic issues such as climate change, natural capital and biodiversity, human rights and modern slavery, and diversity.

The policy was approved by the RI Steering Group in April 2020 following extensive consultation with the ESG Impacts Committee and other stakeholders in the business, and we felt proud that what we had achieved was market leading.

The rationale for change

The pace of regulatory change in ESG investment has been rapid, and we have seen different focuses and requirements in different countries. Stewardship codes and industry frameworks have evolved. There has been a strong focus on preventing greenwashing, and at the same time, investors have taken further steps to quantify and measure the contribution they are making to sustainable development.

Figure 1: Regulatory Change Timeline, Source: FSI, July 2022

Figure 1: Regulatory Change Timeline, Source: FSI, July 2022

UK Financial Reporting Council (FRC)
EU Sustainable Finance Disclosure Regulation (SFDR)
U.S. Securities and Exchange Commission (SEC)
Australian Prudential Regulation Authority (APRA)
UK Financial Conduct Authority (FCA)
Japan Financial Services Agency (FSA)
Task Force on Climate-Related Financial Disclosures (TCFD), developed by the Financial Stability Board to improve and increase reporting on climate-related financial information.
Australian Securities & Investments Commission (ASIC)
Monetary Authority of Singapore (MAS)
MiFID II refers to the revised Markets in Financial Instruments Directive (MiFID) and Markets in Financial Instruments Regulation (MiFIR)
Insurance Distribution Directive (IDD)
The Securities and Futures Commission of Hong Kong (SFC)

For this reason, when we began the process of updating our policy in early 2021, we decided to make significant changes rather than cosmetic ones.

What has changed?

As part of this process we tried to answer the question: ‘what makes a good RI policy?’.

We also identified that there was a lot of positive RI activity, but some of it was not documented or codified. As such, we found that we needed to get really clear on topics including:

  • Our methods of engagement: engagement means different things to different people, and we wanted to be clear about the expectation for meaningful, ongoing engagement.
  • How engagement is prioritised: given the varying nature of the asset classes we manage, the geographies in which they operate and the size of our holdings, this looks different for different teams, but we wanted to be clear on the factors that are taken into account when prioritising and determining the scope of engagement activities.
  • What standards (regulations, codes and guidance) we were implementing: there is a growing list of standards that relate to and inform our RI activities, which we felt was important to recognise.
  • Remuneration of investment team members: integrating ESG risks and opportunities into the investment process has been integrated (either implicitly or explicitly) into our remuneration framework for some time, but we are trying to be more transparent about this.
  • How we monitor companies on an ongoing basis for ESG risks and opportunities: as we mentioned, nothing about RI is ‘set and forget’, especially the risks and opportunities faced by the companies we invest in, and we felt we needed to be explicit about this.

The outcome

At the end of the process, we had mapped out a framework of what we think best practice looks like. This thinking is captured below.

RI policy components

What does best practice look like?


Covers all investment professionals, as well as other departments as relevant.


Regulatory requirements or industry codes

References relevant regulatory requirements or industry codes the firm is subject to or seeks to comply with.


Organisational structure & oversight References the key governance structures, including reporting lines and in respect of committees, membership, responsibilities and meeting frequencies.
Resourcing & training Outlines what RI training is provided and to whom.
Conflicts of interest Comprehensively outlines the approach to managing conflicts of interest.

Policy principles

ESG considerations Defines and identifies the approach to identifying ESG risks and opportunities and systemic ESG issues.
Position statements States the firm’s position on key ESG issues of concern.

ESG integration

General approach Included under ‘What RI & Stewardship means to us’ section
Exclusions Articulates a framework for when and why the firm will introduce exclusions, and clearly explains any current exclusions. A list of excluded stocks meeting these requirements should be made publicly available.

Active ownership

General approach Included under ‘What RI & Stewardship means to us’ section
Engagement References:
  • Prioritisation and scope of engagement activities
  • Methods of engagement
  • Formal frameworks for tracking company progress on material ESG concerns
  • Detailed escalation strategy
 Voting References:
  • The decision making process
  • A position on filing or co-filing shareholder resolutions
  • Dialogue with companies pre- and post-vote
  • How potential and actual conflicts of interest in voting are managed
Policy advocacy and collaboration Articulates the position on policy advocacy and industry collaboration, when the firm will engage and on what topics.
Monitoring and reporting Articulates how progress will be monitored and reported in a structured & comprehensive way.
Transparency Provides detail of transparency related commitments, including details of reporting and how often it is updated/provided.
Oversight Provides detail on any oversight of the processes outlined above.
Remuneration Clearly articulates the link between ESG and remuneration, how this applies and to whom.
Review Has a minimum review period of 2 years, which in reality may not be often enough when there are changes in the market.

Important Information

This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.

We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.

About First Sentier Investors

References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group. Certain of our investment teams operate under the trading names FSSA Investment Managers, Stewart Investors and Realindex Investments, all of which are part of the First Sentier Investors group.

We communicate and conduct business through different legal entities in different locations. This material is communicated in:

  • Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors is a business name of First Sentier Investors (Hong Kong) Limited.
  • Singapore by First Sentier Investors (Singapore) (reg company no. 196900420D) and this publication or advertisement has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) is a business division of First Sentier Investors (Singapore).
  • Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611)

To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.

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