Glossary term
Investor Stewardship
Subject: Sustainability and ESG, Sustainable Finance and Responsible Investment
Also known as: Active ownership, Shareholder engagement
Investor stewardship is the responsible use of an investor's ownership rights, through engagement with companies, voting and monitoring, to protect and grow the long-term value of the money entrusted to it.
Explanation
Asset owners and managers hold shares on behalf of savers, so they are expected to look after those holdings actively. Stewardship covers talking with boards about strategy, risk and pay, voting at shareholder meetings, working with other investors, and escalating when concerns are not addressed, for instance by voting against directors or filing a resolution. Shareholder engagement is the dialogue part of that work. Many markets have stewardship codes, with the UK Stewardship Code the best known, and signatories report on what they actually did. Topics range from climate plans to board composition. Regulators and clients look for evidence of outcomes, not only a policy. Where owners stay silent, weak governance tends to be discovered by a crisis instead of a conversation.
Example
A pension fund holds 3% of a listed manufacturer. After a string of safety accidents, it writes to the chair, meets the board twice and asks for a safety target linked to executive pay. When no change follows, it votes against the re-election of the safety committee chair and tells its own members why.
Not to be confused with
- ESG Integration
- Concerns how an investor analyses and picks holdings. Stewardship concerns what it does as an owner once it holds them.