Stewardship is a core part of responsible investing, which is at the heart of everything we do at Standard Life Assurance Limited (Standard Life). It’s critical to how we manage the risks in your investments. It’s also how we aim to deliver sustainable value for you, as well as how we try to drive positive change in our society.
What is Stewardship
Stewardship is how companies aim to manage money in a responsible way while creating long-term value and leading to sustainable benefits for the economy. It consists of two main elements:
Voting is when we encourage companies we invest in to make management decisions by using shareholder voting rights.
Engagement is when we work with companies we invest in and discuss what could drive positive change within the company.
Both of these elements play a large part in our approach to responsible investing at Standard Life.
Our approach to responsible stewardship
Standard Life Assurance Limited's approach to stewardship is based on:
- The UK Stewardship Code 2020
- The Financial Conduct Authority’s (‘FCA’s’) Policy Statement (‘PS’) 19/13
The FCA PS outlines how UK firms should implement the European Union’s Shareholder Rights Directive II (‘EU SRD II’), which came into force in June 2019. You can find out more about these regulations below.
Our approach reflects our current Group Philosophy on Responsible Investment (110KB).
Additionally, our Approach to responsible investing document (0.4 MB) explains our six Principles for Responsible Investment (‘PRI’). The fourth principle describes how we approach active stewardship:
We are responsible asset owners and actively foster responsible stewardship of all investments that are managed on our behalf. We actively promote good ESG practices through our ownership, engagement, and voting policies and practices.
We review and refresh our stewardship approach annually.
How we implement the policy
We know our customers have a wide range of views. That’s why we offer a choice of funds and options that can support a customer's own personal values.
In some cases, we set the investment strategy and guidelines for these and outsource the management to external asset managers. These managers must take their stewardship responsibilities seriously and, where appropriate, influence the companies they invest in to create positive change. We expect our managers to engage directly with companies on key issues and (where applicable) vote to steer companies towards outcomes that reflect our Principles of Responsible Investment (‘PRI’, see below for more information).
We also offer our customers access to funds, known as external fund links (‘EFLs’), which are set up and managed by external asset managers. They set the investment strategy and guidelines. That means we have no direct control over how these funds are managed; however, if they don’t meet our high stewardship standards, we seek to engage with them and influence positive change.
Funds and portfolios where we set the investment strategy and guidelines
The asset managers that we use to manage our funds are fully responsible for engaging with the investee companies. We use our manager selection process to understand how capable an asset manager is to vote on our behalf. We then establish a contract between us and the manager to formally delegate this to them.
Each of our asset manager's delegated responsibilities include:
- Financial and non-financial performance and risk
- Captial structure
- Social and environmental impact and corporate governance
We conduct annual due diligence exercise on all of our current asset managers to evaluate how they approach responsible investment and stewardship (see our Approach to responsible investing document (0.4 MB)).
Although we outsource our investment management to a number of asset managers, Aberdeen Standard Investments (‘ASI’) is the largest. ASI is committed to the principles of good stewardship and is a signatory of the UK Stewardship Code.
You can find information about ASI’s engagement and voting policies here: https://www.aberdeenstandard.com/en/uk/investor/responsible-investing.
You can also find the ASI conflicts of interest policy on the website: https://www.aberdeenstandard.com/en/who-we-are/policies-and-governance.
You can see the stewardship policies of the asset managers who run our EFLs below. There’s more about the engagement and voting activity of these managers on their websites. Two of our larger external fund managers are:
You can find who the manager of your fund is on your fund factsheet. The majority of our funds are managed by the managers listed above, if your fund is not managed by one of these strategic partners then you can find their stewardship policy on their website.
Where voting rights exist, our asset managers will vote on your behalf. As a customer and investor of our funds, you can’t vote directly with companies that you have exposure to. This responsibility lies with the asset managers who manage the fund.
We make sure that all of our strategic partners have a voting policy in place and vote in line with this policy. Part of our due diligence exercise is to make sure that this policy reflects our philosophy and our Approach to responsible investing document (0.4 MB). We are currently working with our main asset management partners to develop stewardship reports which will let you know how the asset managers voted related to the assets in your fund.
UK Stewardship Code 2020
The Financial Reporting Council’s (‘FRC’s’) UK Stewardship Code 2020 defines stewardship as ‘the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries, leading to sustainable benefits for the economy, the environment and society’.
The Stewardship Code sets out 12 principles which make sure best practice standards, particularly to do with disclosing stewardship practices, are met by all signatories to the Stewardship Code. We require that all of our asset managers are signatories to the UK Stewardship Code 2020.
Further details on the UK Stewardship Code 2020 can be found here: https://www.frc.org.uk/investors/uk-stewardship-code.
Shareholders Rights Directive II (SRD II)
One of the aims of this European Union directive is to promote effective stewardship and long-term investment decision-making in regulated financial services companies. In the UK, the main financial regulator, the FCA, has set out how it plans to implement this directive in PS 19/13 (1.3MB). One of the requirements is for companies like us to publish our policy on engagement and report publicly every year on how we’ve implemented it or explain why we haven't.