Compliance & Regulation

CFA Institute Report: Markets in Asia Pacific Should Promote Stewardship Codes and Practices

CFA Institute, the global association of investment management professionals, said in its report and survey, Stewardship 2.0, that the level of awareness of stewardship codes among institutional investors in APAC remains low and needs to be increased.

According to the survey, 42% of all respondents rated themselves as having little or no understanding (1 or 2 on a 5-point scale) of stewardship codes in the markets in which they invest, while only 28% said they understood them well or very well (4 or 5 on a 5-point scale). Less than half of investors (47%) said they considered stewardship principles when making investment decisions, the firm said in a press release.

Stewardship in investment management is generally understood as engagement by institutional investors with public companies to generate long-term value for shareholders, although specific definitions and principles differ among markets. Good stewardship contributes toward the building of sustainable economies by enabling more efficient capital allocation, fostering best practices in business management and corporate governance, and encouraging better risk management.

The survey responses from members of CFA Institute in nine Asia Pacific markets show that many respondents do not fully appreciate the potential of stewardship and engagement with companies to create value. The report highlights the need for a better understanding of the benefits of stewardship and the role stewardship codes play in promoting sound investment governance practices and in the advancement of environmental, social and governance (ESG) principles.

Mary Leung, Head of Advocacy, Asia Pacific, CFA Institute, said: “What is needed is an ongoing, transparent process of engagement with issuers to improve operating and financial performance, devote a higher level of attention to material ESG factors, to bolster confidence in markets and provide a clear linkage between implementation of stewardship principles with positive outcomes that can accelerate value creation.” 

Key Trends:

  • Sustainability and ESG factors are emerging as an important focus of stewardship. Investors support incorporating sustainability into stewardship responsibilities.
  • The scope of stewardship is expanding beyond the traditional world of listed equities, to other asset classes, such as fixed income and private equity.
  • The principles of stewardship are being applied to a broader set of stakeholders. In addition to asset owners and asset managers, they now tend to cover proxy advisors and investment consultants.
  • Most recent updates to stewardship codes tend to emphasize better transparency and reporting, in particular by disclosing voting records and reasons for voting.


Challenges to implementation

Two obstacles to a broader implementation of stewardship codes stand out: an unclear link between engagement and value creation, cited by 38% of respondents, and a high cost of engagement, cited by 36%. In Asia Pacific, the effectiveness of engagement is reduced by high levels of ownership concentration and low levels of institutional ownership in public companies. This reduces institutional investors’ motivation to engage in stewardship activities.

A broader recognition of stewardship’s benefits is further hampered by the lack of systematic regional analyses of institutional investors’ compliance with stewardship codes and its tangible effects. In the absence of such quantitative evidence, compliance with stewardship codes often becomes a matter of giving lip service to stewardship principles rather than achieving substantive outcomes.

To improve effectiveness, 62% of investors indicated a preference to have a regulatory body as a supporter and overseer of stewardship codes and 49% believed that the comply-or-explain model provided a sufficient level of oversight and enforcement. 86% of investors signalled that stewardship codes can improve engagement in asset classes other than equity (e.g. fixed income), lending weight to an emerging trend.

The Way Forward

In the report, CFA Institute recommends:

  • Adoption of principles-based stewardship codes, enforced on a comply-or-explain basis, with effective monitoring of compliance.
  • Prominent inclusion of sustainability and ESG in stewardship codes.
  • Promotion of stewardship codes by local regulators and industry bodies; creating opportunities for institutional investors to learn about the codes and their implementation in practice.
  • Establishing global best practices, while allowing for flexibility to cater to different markets and business models.
  • Exercise of “leadership from the top” by asset owners in promotion of stewardship codes, and encouraging stewardship practices among other players in the industry.



The survey received responses from 270 CFA charterholders from Australia, Hong Kong SAR (China), India, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand, serving in a range of roles, including investors, corporate executives, service providers, academics, and regulators. The survey gauged the awareness and application of stewardship codes in the region; respondents’ views on the effectiveness and how current codes have influenced the integration of ESG factors in the investment process; and how the codes could be improved.