Stewardship and Responsible Investment

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By Cristina Ungureanu – Head of Corporate Governance, Eurizon Capital

 

 

Good corporate governance, sustainable business practices and well-functioning markets are essential for investment company Eurizon to safeguard the wealth of clients.

In our investment choices, we integrate environmental, social and governance (ESG) factors and sustainable and responsible investment principles to pursue performances and remain sustainable while creating value for our clients.

Our aim is to support the development of valid and sustainable businesses, and we do so by promoting responsible growth and high governance standards across the companies we invest in. In this way, we can help them achieve sustainable earnings and increase their economic and financial value, ultimately creating value for their final clients and the civil society.

Eurizon was a pioneer in the consideration of responsible investment, being the first asset manager launching ethical funds in Italy, back in 1996.

In recent years, Eurizon has strengthened and evolved its approach to active and responsible investment. In 2015, Eurizon created a separate corporate governance division, overseeing the adoption of the Italian stewardship principles, being the first asset manager in Italy to implement such activity with dedicated resources. Becoming a signatory to the UN PRI in 2015 and integrating the ESG factors in the investment decision process for the active portfolios in 2017 have further redefined how Eurizon thinks about company performance and investment decisions.

Another important step, taken this year, has implied shaping the corporate governance and sustainability activities by creating a single ESG unit under the investment division. This move is meant to align our stewardship and portfolio management activities even more, to achieve full integration and have a holistic approach towards our issuer companies, while promoting the ESG culture in our organisation.

Stewardship for Eurizon has become an action, not only a position

In fact, active ownership and responsible investment now permeate all areas of business; Eurizon considers these as important values, which will further drive the way we conduct our investment activity.

Eurizon is a strong believer that good corporate governance creates value for the company, for investors and for society. Companies with high standards of governance embedded in their organisation and processes are more likely to achieve profits sustainable over time and to increase their value both economically and financially.

We have seen the definition of corporate governance get broader and broader, evolving to meet the changing needs of the society. While at its origins it was seen as a way of enabling shareholders to be assured that their investments were being properly looked after, (i.e. focus on internal controls and audit), the definition now talks about corporate governance – together with sustainability – being means of fostering long-term growth and trust in business, contributing to more inclusive societies.

The concept of Stewardship is aligned with Corporate Governance and Sustainability and needs to be applied both ways: to investors and companies. It is about looking at the long-term interests of the business. The stewardship activity is fundamental for Eurizon, both for traditional investment focus and for those related to ESG topics.

Eurizon has always held dialogues with issuer companies on financial and strategic matters, but in recent years we have increasingly focussed on aspects linked to governance, while the environmental and social factors have been significantly growing in importance.

Highly active and responsible shareholders are rapidly heading towards an engagement approach where it would be impossible to talk about corporate strategies without addressing all three variables: E, S and G. We are totally working on the basis that
only a strong ESG proposition can safeguard a company’s long-term success.

The benefits of stewardship accrue over several years and these have already started to be clearly felt – both within our system and on the side of our issuer companies that we monitor and engage with. By weaving a healthy corporate culture and governance into the business model, companies are not just contributing to the overall success of their own business but also creating an environment on which investors can rely.

Investors can leverage this through stewardship; thus, both companies and investors are geared to create sustained growth in the economy.

Future approach

Going forward, our main priorities relate to further contribute to shaping high standards of corporate behaviour and performance at companies where Eurizon invests worldwide, within an integrated context: governance and sustainability – investment decision-making.

Eurizon will continue to look beyond compliance and one-size-fits-all voting and engagement policies. Instead, seeking specific information from individual companies that help understand the fundamentals of the business and its strategic goals.

A paramount attention is towards our clients, whose demand for active stewardship and ESG integration has increased, looking for sophisticated investment opportunities. Our interaction with clients is moving from a purely transactional relationship to a more collaborative one.

About Eurizon

Eurizon Capital SGR is the investment company of the Asset Management Division of the Intesa Sanpaolo Group. In Europe, Eurizon has the following subsidiaries: Eurizon Capital S.A., a Luxembourg asset manager with which it develops growth on international markets; Epsilon SGR, an Italian company specialised in quantitative portfolio management; the Eastern European HUB, consisting of VUB AM, a Slovakian asset manager, CIB IFM in Hungary and PBZ Invest in Croatia; and Eurizon SLJ Capital LTD (65 per cent), in the UK, a joint venture with Stephen Li Jen and Fatih Yilmaz (35 per cent), which is specialised in investment services and consulting with a focus on foreign currency management and macroeconomic research. On 25 October 2019 in the UK, the company finalised a minority investment in Oval Money (12.5 per cent), an Italian-English fintech start-up involved in the digital payment services and savings sector, with which a partnership was established.

Eurizon also has a presence in Asia through Eurizon Capital (HK) Limited, an asset management company based in Hong Kong and, through its 49 per cent stake in Penghua Fund Management, one of China’s leading asset managers. Finally, Eurizon is active on international markets, thanks to the marketing of its Luxembourg funds in 25 countries, and operates its own structures in France, Germany.