This Is What It Takes to Be a Long-Term Investor

FCLT Global, a non-profit organization led by institutional investors including BlackRock and the Canada Pension Plan Investment Board, has released new guidelines that aim to help allocators and asset managers become better long-term investors.

The new materials focus on stewardship, or responsible governance, and include a sample stewardship code, a form of governance document that can serve as a framework for long-term value creation, the organization said. According to FCLTGlobal, a stewardship code “helps clarify the responsibilities of institutional investors, laying out core principles to foster a shared understanding among stakeholders including regulators, investors, and investees.”

“Globally, the use of stewardship codes as a means of good governance is becoming more common,” FCLTGlobal CEO Sarah Williamson said in a statement Friday. “If purposefully structured and properly organized, they can guide investors and investees past short-term market fluctuations and focus on longer-term measures of success.”

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FCLTGlobal’s model stewardship code includes seven main principles, which were identified by the non-profit in collaboration with institutional allocators and asset managers. The principles include the integration of environmental, social, and governance factors into investment decision-making, as well as a mandate to act collectively with other long-term investors to enhance or preserve long-term value.

“Properly organized, stewardship codes can be a vital tool for promoting long-term thinking across the value chain, guiding investors and investees toward behaviors that help them see past short-term market vicissitudes and focus on longer-term measures of success,” FCLTGlobal said on its website.

FCLTGlobal, formerly known as Focusing Capital on the Long Term, started as an initiative between the CPP Investment Board and McKinsey & Co. It is chaired by Mark Wiseman, the former chief executive of CPPIB and current global head of active equities at BlackRock. Other directors include Chow Kiat Lim, the CEO of Singapore sovereign fund GIC, and Peter Harrison, group chief executive of Schroders.

The group currently has 48 member organizations including hedge fund Bridgewater Associates, Dutch pension manager APG, Australia’s Future Fund, and State Street.