Stewardship Code

This Stewardship Code sets out EQ’s firm-wide commitment to the responsible stewardship of client assets and is formally reviewed and updated annually by the Board.

EQ applies the United Nations Principles for Responsible Investment (PRI) definition of Stewardship, namely:

The use of influence by institutional investors to maximise overall long-term value, including the value of common economic, social and environmental assets, on which returns and client and beneficiary interests depend.

Defining EQs stewardship objectives

The aim of our stewardship activity is to protect our clients’ interests, and the value of their investments, including non-financial value where material.

As a signatory of the PRI, EQ implements the following relevant Principles through its stewardship practices:

• Principle 2: We will be active owners and incorporate ESG factors into our ownership policies and practices. 

• Principle 4: We will promote acceptance and implementation of the principles within the investment industry. 

• Principle 5: We will work together to enhance our effectiveness in implementing the principles. 

…

 EQ’s engagement tools and methods are tailored to reflect the nature of its investment approach, given that the firm’s assets are predominantly invested through externally managed collective investment vehicles. 

1) Assessment and monitoring of external fund managers’ own engagement and voting policies, processes, and records. 

2) Engagement with external fund managers on identified weaknesses moving this closer in line with our evolving view of ESG integration and stewardship best practices.  

3) Collective, collaborative engagement on underlying holdings to elevate concerns on systemic material sustainability risks. 

Below are EQ’s commitments across each of these three areas.

1) Assessment and monitoring of external fund managers’ own engagement and voting policies, processes, and records.

EQ predominantly invests in funds and investment trusts managed by external third-party managers. The investment team therefore focuses on assessing and monitoring the stewardship activities of those managers, exercising shareholder rights on behalf of client capital. 

To support this, EQ has developed an ESG and stewardship assessment methodology that enables the consistent and transparent rating of fund managers’ engagement and voting policies, processes, and track records. The methodology distinguishes between levels of engagement intentionality, differentiating between fund-specific and asset manager-level activities, while also calibrating expectations by asset class in line with each fund’s mandate. 

This assessment of engagement and stewardship forms part of the overall fund conviction process, and minimum baseline expectations are a determining factor in whether a fund passes the fund selection committee. 

For all investments, EQ monitors the frequency and intent of engagement activity and evaluates how these efforts are integrated into the investment process. Voting activity is also assessed against the expectations set for each investment strategy. 

The outcomes of these assessments, including any remaining identified weaknesses, will dictate where we prioritise our engagement efforts.

2) Engagement with external fund managers on identified weaknesses, moving this closer in line with our evolving view of ESG integration and stewardship best practices 

EQ seeks to support fund managers to keep abreast of rapidly evolving best practice and regulation including in stewardship, sustainability risk analysis, ESG integration, and net-zero strategy. We use underlying holdings’ assessment to inform these engagements, and test policies work in practice. 

EQ also engages with external fund managers on a select number of systemic sustainability issues, including climate change and human rights risks. These themes are revisited each year and are chosen to reflect topics that are highly material across our clients’ holdings, economy-wide risks and return drivers that are difficult to manage through stock selection.

3) Collective, collaborative engagement on underlying holdings to elevate concerns on strategic engagement themes.

Collective and collaborative engagement represents the most effective avenue through which EQ can directly drive improvement in the underlying companies held within its selected external funds.

To this end, EQ participates in a select number of investor collaboration networks aligned with its systemic engagement themes, focusing on targeted sets of companies.

Within these efforts, EQ contributes to objective-setting, participates in company meetings, issues engagement letters, and conducts site visits where appropriate. 

EQ also collaborates with investors and industry bodies in advocating for sustainable investing, best practice, and increased transparency/standardisation of approaches. 

Where a weakness in ESG or stewardship is identified in an external fund manager’s policies, processes, or practices, the first point of response is a dedicated engagement meeting.

Should the weakness, for example, a holding that breaches exclusions or voting activity that is consistently misaligned, run contrary to the objectives of the relevant EQ portfolio strategy, and the fund manager proves unwilling to engage constructively within a reasonable timeframe, EQ’s investment analysts will reflect this in their fund convictions and seek a suitable alternative within 12 months.