First State: increased transparency key to improving investor trust

Transparency is a key component of stewardship, according to a survey conducted by First State Investments. Some 37% of respondents said a high degree of transparency and reporting was the most important indicator of effective equity investor stewardship.

The survey was conducted during the company’s annual Responsible Investment and Stewardship Forum, which is attended by asset managers, asset owners and pension funds. The event included a discussion on the role of responsible investment and stewardship within the asset management industry.

The company said that through reporting, the industry could enhance its effectiveness of responsible investment implementation for the ultimate benefit of clients. Improving transparency could also boost trust in the asset management and overall financial services sectors.

Mark Lazberger, CEO of First State, said, “The financial services sector as we know has really suffered in terms of the overall rating the community has in terms of its overall trustworthiness.”

He cited a report from the CFA Institute from last year that found that only 23% of respondents felt they could trust their service provider to always act in their best interests. Lazberger argued that taking a long-term view and improving transparency was one way financial services can begin to rebuild this trust.

How to assess and incentivise long-term performance was also a key theme at the event. The research suggested that asset managers’ investment performance metrics are not reflective of effective long-term investment time frames.

“This was evident when 33% of the audience supported a 3-5 year rolling average benchmark index as the best measurement of investment performance”, First State said.

“When asked what would best enhance the effectiveness of engagement, 32% voted for better alignment with investment performance with just 8% feeling the voting against management was the best form of action.”

Asset owners were also found to be driving the demand for environmental, social and governance (ESG) issues being integrated. The survey found that asset managers were influenced by strong mandates from asset owners and the requirement for better long term reporting.

First State launched a set of global stewardship principles in December last year, which it said help put its clients’ interest first and boost its responsible investment credentials.

Photo: Ged Carroll via Flickr

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