The Institute of Company Secretaries of India Governance, risk management and compliance: Global perspective Gearing up for global interface 31 August 2018 Tim Sheehy Director General, ICSA

Governance practices are global - the drivers Growth in worldwide pensions - (US$26bn in 2007 to US$41bn in 2017) has put pressure on funds to ensure sustained growth through good governance Organised institutional investors through stewardship codes are defining engagement in the major capital markets Sustainability and the social contract to operate are the key issues Corporate secretaries can be in the driver’s seat

Issues for pension funds Pension design, towards a direct contribution model Bigger impact from evolved regulations Governance issues are challenging Culture makes a difference Sustainability and long- horizon investing Technology rising © 2018 Willis Towers Watson.

Organised institutional investors Large institutional investors (pension funds, sovereign wealth funds) now exert significant pressure for better governance - Calipers, ACSI, Blackrock, Canadian Pension plan 30-year horizon and cannot sell out of large companies Driving force behind the emergence of Stewardship Codes – UK, Italy, Japan, Brazil, Canada, EU, Kenya, Malaysia, Singapore – 14 in all

Current trends in engagement High expectations for companies to engage with their institutional investors Investors want access to the Chair and a regular dialogue ESG is the growth topic as is risk management and cyber risk Trends are the same whether in developed or developing markets

Methods of engagement: ICSA/OECD research

Topics discussed: ICSA/OECD research

Engagement and social contract: today’s governance ‘issue’. Social impact, climate change, and diversity…are among the phrases and issues being raised by today’s major institutional investors. Forbes magazine “The large influx of capital into passive index funds–now [comprising] 42 percent of all publically traded funds–has put more pressure on the BlackRocks, the Vanguards…to align themselves with…long-term strategic investment as opposed to short-termism.” Forbes magazine 3 Ways Shareholder Engagement Has Evolved PwC Investors expect direct engagement with the board Long-termism has become the golden standard Best practices guidelines for engagement are everywhere

ASX Principles – just one example Principle 3: return of the social contract? Current: A listed entity should act ethically and responsibly” Proposed: A listed entity should instill and continually reinforce a culture across the organisation of acting lawfully, ethically and in a socially responsible manner.

The corporate secretary in the driver’s seat Issuers and investors engage via the company secretary in many companies Institutional investors, aside from performance, focus on the governance of who they invest it…and often turn to the chair and company secretary for insight The company secretary occupies that unique position as the link between the board, management and shareholders The company secretary is best placed to be the champion of good governance within their organisation