This paper offers guidance on internal governance and external stewardship activities and acknowledges the dual strategic boardroom imperatives of value creation and preservation toward sustainable finance and business. Part one lists the seven principles, part two comprises guidance on how to implement the principles into practice, and part three outlines the ecosystem of stewardship.

Main changes from the principles published in 2016:

• A greater emphasis on fiduciary duty, culture, and values by institutional investors
• An explicit link between fiduciary duty and long-term value creation
• Use of environmental, social, and governance (ESG) factors in investment decision-making and stewardship
• Greater focus on systemic risks relevant to institutional investors
• More emphasis on the application of stewardship to asset classes beyond listed equities
• Emphasis on capital allocation for creditor and shareholder engagement
• Emphasis on voting rights against dual class shares and other forms of differential ownership
• Encouragement of investor disclosure around stewardship activities and outcomes

ICGN Global Stewardship Principles:

1. Internal governance: the foundation of effective stewardship

Principle 1 emphasises systemic risks as part of fiduciary care, and the need for investors to have a code of ethics or conduct. Investors should review their own governance and utilise compliance capabilities to curtail issues including conflicts, insider information and market manipulation.

2.  Developing and implementing stewardship policies

Principle 2 covers recommendation of policy development that addresses components of the ICGN stewardship principles. Policy structure should disclose the scope of the assets and activities they cover, in consideration of different investment strategies and geographies.

3. Monitoring and assessing investee companies

Principle 3 underlines the importance of investor diligence in monitoring companies held in investment portfolios using risk-based tools or frameworks to assess company performance, strategies, and potential, as well as engagement in ESG issues.

4. Engaging companies and investor collaboration

Principle 4 encourages the benefit of investor collaboration toward engagement and value outcomes for beneficiaries. Investors should apply risk-based approaches and policies for company engagement and alignment.

5. Exercising and protecting voting rights

Principle 5 recommends investors disclose voting policies, voting records, and voting decision processes. Investors are also encouraged to challenge companies with dual class or unequal share structures that have potential to dilute voting rights.

6. Promoting long-term value creation and integration of environmental, social and governance (ESG) factors

Principle 6 stresses the importance of integrating ESG factors in investment decision-making and stewardship activities. Beneficiary long-term success should be prioritised over short-term success, and investors should inform beneficiaries of threats to long-term success and success opportunities, particular through ESG factors.

7. Meaningful transparency, disclosure, and reporting

Principle 7 expresses importance in investors’ public disclosure of stewardship policies and activities. ICGN recommends investors signify commitment to stewardship by becoming a signatory to a relevant national code and through public endorsement of the ICGN global stewardship principles.

Part three illuminates the relevance of stewardship to participants along the investment chain, including asset owners, asset managers, creditors, companies, regulators, and consultants. The paper closes with pre-conditions of effective stewardship, specifically within a “comply or explain” context.

1. Investors with international portfolios can refer to the ICGN GSPs when applying stewardship standards in a global context. The principles become particularly useful for investors aligning with markets without stewardship codes or markets guided by differing stewardship codes.
2. The GSPs have been emulated in markets globally, particularly in Asia and Europe. The principles offer basic framework of key stewardship responsibilities and are capable of being applied in either developed or emerging markets, intended to apply with suitable flexibility to all investment styles and approaches.
3. The GSPs replace the ICGN statement of principles for institutional investor responsibilities (2013), with references to the original recommendations and addition of new principles to complement regulation changes and market practice. This paper is the most current version of the principles, as of 2020, and the principles are reviewed periodically.
4. The GSPs can be a useful source of latest innovation and good practice, both for stewardship codes under formation and as existing codes come up for periodic review. Compared to many other stewardship codes, the ICGN GSPs are distinguished by their emphasis on investor governance, a crucial element toward successful stewardship. Global stewardship codes are listed in Annex 2 of this paper and are publicly accessible on the ICGN website. Stewardship is becoming increasingly supported by governmental and regulatory authorities seeking to promote sustainable capital markets and responsible investor practices.
5. Asset owners invest capital to preserve and enhance the value of beneficiaries' assets. The GSPs act as a guide for asset owners in terms of observing stewardship practices and policies of investors/asset managers and acknowledge the stewardship capabilities of their asset managers. For asset owners who have limited in-house capacity to implement stewardship, they should then ensure that asset managers and service providers are implementing stewardship principles. Asset managers usually provide stewardship services on behalf of asset owners, in the form of monitoring, engaging, and voting.
6. Creditors, including bondholders and equity holders usually show interest in promoting responsible and sustainable stewardship practices, particularly in company risk management oversight. The GSPs of monitoring and engagement are both relevant to creditors in this context. Companies play a role in successful stewardship by supporting ambitions of stewardship codes. For listed companies with their own pension funds, companies act as asset owners, and are then encouraged to set out clear stewardship practices in corporate pension funds.
7. Regulators can play a crucial role in stewardship in individual markets and should seek to support investor capacity to exercise stewardship, for example, by facilitating collective engagement on environmental, social, and governance (ESG) matters. Regulators wishing to promote stewardship in any market are responsible for developing, publishing, and reporting against a national stewardship code. The GSPs offer an internationally recognised framework to facilitate this responsibility. Investment consultants/ advisors/ service providers provide research and voting services which can assume stewardship responsibilities and are therefore subject to the GSPs.
8. Stewardship assists in promoting corporate governance and contributes to sustainable value creation for companies. Stewardship can also preserve and enhance long-term value as part of a responsible investment approach.
9. Through collaboration and advocacy of the ICGN global stewardship principles investors can enhance reputation, protect shareholder rights and strengthen systemic integrity.