Stewardship Policy

Morningstar Investment Management Australia
Stewardship Policy, February 2022

Stewardship
Morningstar Investment Management’s mission centres on helping investors reach their financial goals. We believe in the careful and responsible management of clients’ assets. In addition to the requirements set out in our Corporate Governance Policy, Morningstar Investment Management has developed this Stewardship Policy to outline how we provide effective asset stewardship on behalf of investors.

Morningstar Investment Management’s investment philosophy is firmly grounded in its seven investment principles, inspiring our principles-based proxy voting approach and providing an anchor to our process as we commit ourselves to act in the best interest of our clients.

Morningstar Investment Management’s seven investment principles are as follows:

We put investors first

• We believe the firms that put investors first win in the long term because their investors win.
• Since 1984, Morningstar, Inc. has been helping investors reach their financial goals. Our fiduciary duty to our investors is paramount.

We’re independent-minded

• To deliver results, we think it’s necessary to invest with conviction, even when it means standing apart from the crowd.
• Our research shows that making decisions based on fundamental analysis, rather than short-term factors and sentiment, delivers better long-term investment results.

We invest for the long term

• Taking a patient, long-term view helps to ride out the market’s ups and downs and take advantage of opportunities when they arise.
• Investing with a multi-decade horizon aligns with investors’ focus on increasing their purchasing power over their lifetimes.
• The long term is the only period over which fundamental, valuation-driven investing works.

We’re valuation-driven investors

• Anchoring decisions to an investment’s fair value, or what it’s really worth, leads to greater potential for returns.
• Valuation-driven investing through a long-term focus on the difference between price and intrinsic value enable investors to get more value than they’re paying for.

We take a fundamental approach

• Powerful research is behind each portfolio position we hold, and we understand what drives the cash flows of every investment we analyse.
• Fundamental investing incorporates a focus on the future earnings of an investment and not just its prospective price change.

We strive to minimise costs

• Controlling costs helps investors build wealth by keeping more of what they earn.
• Investment returns are uncertain, but costs are not.

We build portfolios holistically

• To help manage risk and deliver better returns, truly diversified portfolios combine investments with different underlying drivers.
• Portfolios should be more than the sum of their parts.
• True diversification can have a powerful impact on a portfolio’s risk-adjusted returns—but simply holding more investments isn’t the same as true diversification.

Our priority is to ensure investors meet their personal and financial objectives and, within the boundaries of our fiduciary duty, we want to take all the essential steps to make sure these objectives can be attained. In order to do this, we believe it’s important to communicate to the companies we invest in what we believe are our investors’ best interests. We undertake several leading active ownership commitments/practices to steward our clients’ investments in line with their ESG preferences and the goal of achieving sustainable, long-run returns:

• ESG Integration: We assess the management of ESG risk as part of our investment process (see our ESG policy for more information on how ESG is integrated into our investment process:
  https://morningstarinvestments.com.au/esg-policy/).
• ESG-related preference-driven considerations: We may exclude particular types of companies from portfolios to reflect the ESG preferences of ESG-focused investors (see Appendix A and Appendix B of our ESG policy for further details: https://morningstarinvestments.com.au/esg-policy/).
• Shareholder voting: We use a principles-based voting policy framework to ensure our investors’ interests are considered when undertaking voting on corporate proxies. This framework, including voting principles and guidelines for common voting areas, is outlined in further detail in Appendix A of this Policy.
• Company Engagement: We may actively engage with the companies we own to promote responsible corporate behaviour. Our approach to Engagement is detailed in Appendix B of this Policy.
• Adopting strong internal governance structures, policies and practices. Our commitments are outlined in Appendix C of this Policy.
• Class Actions: We may participate in class actions as a cost-effective way to recover losses experienced in the event of corporate misconduct and to deter poor corporate governance practices. Participation may be conducted directly through our custodian, through appointed Managers acting on our behalf, and/or via Managers participating on behalf of collective investment vehicles we are invested in.
• Reporting: We provide transparency regarding our policies and stewardship efforts through reporting.

The Chief Investment Officer, Asia Pacific, in conjunction with the Head of Investment Operations is responsible for implementation of this policy.