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®) ROCKEFELLER & CO. Accountability & Reflection As the Governor of the Bank of England Mark Carney said in 2015, the “crisis and its aftermath laid bare that many of our markets didn’t live up to these standards” of transparency, responsibility and accountability, and warned that until markets regain those qualities they cannot retain their social license to operate. The crisis also underscored the lack of effective shareholder scrutiny of boards of directors and senior management on essential corporate governance issues such as risk management, corporate strategy, independence and long-term value creation. To overcome these shortcomings, the global investment community took on the role of “active stewardship’ in capital markets. It started to adopt stewardship codes to engage with companies in seeking to improve business practices and disclosures. These efforts were focused on seeking major reforms towards financial stability and greater corporate responsibility. 2010: Active Stewardship is Born The concept of “active stewardship” was first introduced in the United Kingdom in 2010 when the country’s Financial Reporting Council introduced the UK Stewardship Code.” According to the code, stewardship means that investors are expected to proactively engage with companies on issues of strategy, performance, risk, capital structure, and corporate governance, including culture and remuneration. In January 2017, a group of U.S. and international institutional investors with combined assets of $17 trillion followed suit and launched the first U.S. Stewardship Code. The adoption of stewardship codes in many national markets highlights a new set of responsibilities for shareholders. By signing on, institutional investors commit to closely monitor their companies and to use their voting power to improve corporate behavior. As fiduciaries, investors also commit to be more transparent about their own activities to their clients and other stakeholders. Today, active stewardship includes many environmental, social and governance (ESG) issues that are priorities for those investing with a sustainability mindset. As fiduciaries, we at Rockefeller & Co. seek to engage with boards of directors and senior management on ESG issues to identify potential long-term business risks and encourage opportunities such as management quality and ethics, human capital and labor issues, climate change and low carbon economy. We believe that such engagements can have a long- lasting impact both on business profitability and competitive advantage. Beyond the potential long- term investment growth and sustainability benefits of implementing these engagement activities, institutional investors are leading the efforts to rebuild trust in public markets after the Financial crisis, starting where the issues were most apparent — the financial services sector. Embracing Change: Financial Services Sector Borne out of the trauma from 2008 and a new stricter reg- ulatory environment, financial services companies were the first to face this new level of share- holder scrutiny and engagement. Wall Street came under pressure by regulators and society to take significant steps to change its corporate governance guidelines, business practices and culture. 3 ACTIVE STEWARDSHIP IN FINANCIAL SERVICES It may come as a surprise to learn that several large banks led the reform efforts in 2010 by review- ing their business standards and ethics codes and implementing HOUSE_OVERSIGHT_012074