Kenya has adopted an investor stewardship code as part of its development as an attractive market for financial investment.

The stewardship code was enacted by the country’s Capital Markets Authority which last year published a corporate governance code, developed in partnership with the World Bank Group. This code succeeded the earlier guidelines on corporate governance, which had been in place since 2002. This was seen as a trailblazing move which the World Bank saw as a model for the development of a regional code in East Africa.

In 2015 Kenya passed a Companies Act which introduced a new company law framework which was accompanied by the development of the corporate governance and stewardship codes. The stewardship code proposes that investors engage with companies on issues relating to the corporate governance code. It also suggests that investors should encourage companies to follow the corporate governance code in respect of its requirement that they operate in a way to improve the social good. Investors should also incorporate social, environmental and ethical concerns into their investment processes, the stewardship code suggests.

Japanese commitment to stewardship

Meanwhile in Japan its Government Pension Investment Fund (GPIF), which manages the funds of Japanese public sector pension schemes,  has shown its commitment to Japan’s stewardship code – originally published in 2014 – by adopting stewardship principles for its external fund managers.

The GPIF’s principles state that its asset managers should adopt the country’s stewardship code and stated that asset managers should develop and publicly disclose a policy of their stewardship activities including engagement. The principles also suggest that asset managers should focus on ensuring that their stewardship policy and activities contribute to medium- to long-term shareholder value and, not falling into short-termism. In addition, for more effective stewardship activities, asset managers should consider formulating medium- to long-term action plans.

The principles also state that asset managers should take non-financial information into consideration when engaging investee
companies.

US regulator adopts new audit standard

The Public Company Accounting Oversight Board in the US has adopted a new auditing standard to enhance the relevance and usefulness of the auditor’s report by providing additional and important information to investors.

The PCAOB said the standard and related amendments required auditors to include in the auditor’s report a discussion of the critical audit matters (CAM) which are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgement.

The new auditor’s report format, tenure, and other information: audits will become effective for fiscal years ending on or after 15th  December 2017 while the communication of CAMs for large companies will apply to audits for fiscal years ending on or after 30th June 2019 while the communication for all other companies apply to audits for fiscal years ending on or after  15th December 2020.

Last Updated: 30 June 2017