Money & Banking

SBI MF meets Stewardship Code norms ahead of April 1 deadline

Suresh P Iyengar Mumbai | Updated on March 12, 2020 Published on March 12, 2020

SBI Mutual Fund has claimed that it has become the first mutual fund in the country to comply with market regulator SEBI’s Stewardship Code ahead of the April 1 deadline, even as other large fund houses are still working towards compliance with the new norms.

Introduced last December, the Stewardship Code is applicable to mutual funds (MFs) and all categorise of alternative investment funds (AIFs) with regard to their investment in listed equities.

Navneet Munot, ED & CIO, SBI Mutual Fund, told BusinessLine that the fund house was following most of the recommendations prescribed in the Code as it is part of its best practices. Its joint venture with Amundi (an European asset management company) also helped frame the policy in advance, he added.

As per the Code, MFs need to formulate a comprehensive policy on the discharge of their stewardship responsibilities, publicly disclose it, as well as review and update it periodically.

This apart, they are required to have a policy on continuous monitoring of their investee companies in respect of many aspects, including performance of the companies, corporate governance, strategy, and risks, among others.

In addition, they need to have a clear policy on how they manage conflict of interest in fulfilling their stewardship responsibilities and publicly disclose it.

With most of the MFs promoted by banks, the major challenge for the asset management companies (AMCs) in following the Stewardship Code is to frame guidelines in areas of conflict of interest, and instances where voting decisions have to be taken on company proposals, said a senior official of a mutual fund house.

In addition, he said AMCs which have not complied with the Environment Social Governance(ESG)-based investment approach will find it difficult to meet the Stewardship Code norms.

SBI MF has developed a comprehensive check list across the ESG aspects of the company’s management of its affairs. The ‘ESG Framework’ helps it to delve into a company’s management practices, culture and risk profile and question the management if the board’s decisions are harmful to the long-term shareholder.

The fund house has formed a Proxy Voting Committee consisting of five-members to decide on voting in group companies of the AMC or the investee company has substantial investments in the schemes of SBI Mutual Fund.

No employee nominated by the parent will be part of the Proxy Voting Committee for decision on that particular company.

Similarly, for all other possible instances of conflict, SBI MF’s Conflict of Interest Committee will decide the course of action.

SBI MF Fund Management and Research Team will be responsible for the monitoring of the investee companies’ performance. The investment team considers the investee companies’ business strategy, financial performance, capital structure, leadership effectiveness, succession planning, corporate governance, ESG initiatives, disclosures and other parameters they consider important while making investment decisions and create an ESG Rating. Any violation of shareholder rights and their grievances are also actively monitored.

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Published on March 12, 2020
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