The PRI defines stewardship as: “the use of influence by institutional investors to maximise overall long-term value including the value of common economic, social and environmental assets, on which returns and clients’ and beneficiaries’ interests depend.”
Stewardship can be implemented through a variety of investor stewardship tools, including tools that use investors’ influence over current or potential investees or issuers such as:
- engagement with current or potential investees or issuers across all asset classes;
- voting at shareholder meetings;
- filing of shareholder resolutions/proposals;
- direct roles on investee boards and board committees;
- and, where necessary, litigation.
Stewardship can also be implemented by investors using their influence over policy makers and other non-issuer stakeholders, such as:
- engagement with policy makers;
- engagement with standard setters;
- contributions to public goods (such as research);
- public discourse (such as media) that supports stewardship goals;
- and negotiation & monitoring of service providers in the investment chain (e.g. asset owners engaging with investment managers.)
Many of these tools can be used collaboratively by investors.
Frequently asked questions
What is meant by overall long-term value?
Long-term value refers to any long term value that accrues to the ultimate beneficiaries of an investment. This may include:
- returns within an investment portfolio;
- financial value for beneficiaries beyond the portfolio (for example, the net effect of increased home insurance premiums to protect against extreme weather exacerbated by climate change); and
- welfare outcomes for beneficiaries (for example, the value of living in a world that is just, equitable and habitable)
How does stewardship relate to investor duties?
Fiduciary and other duties exist to ensure that those who manage other people’s money act in the interests of beneficiaries. As a critical tool for addressing sustainability risks in portfolios and maximising overall long-term value, stewardship is considered to be part of investor fiduciary duties.
What is meant by common economic, social and environmental assets?
Common assets is another term for ‘public goods’. It refers to those ‘goods’ or ‘assets’ that provide a commodity or service that all members of society benefit from. While investors do not directly invest in such common assets, given the reliance of our societies and economies on them, investment returns plus broader client and beneficiary interests are dependent on them.
Examples of common assets are a stable climate, functioning ecosystems, equitable societies where rights are respected, and institutions which safeguard these and other common assets.
What is the difference between the terms ‘stewardship’ and ‘active ownership’?
We view the terms ‘stewardship’ and ‘active ownership’ as synonyms of one another.
For clarity, active ownership relates to investors’ rights and positions of owners of securities. Active ownership – as with stewardship – is applicable across asset classes.
What is NOT classed as ’engagement’ or ‘stewardship’?
While often highly valuable to ESG integration, not all interactions between investors and their investees are classified as engagement or stewardship. Interactions that are not seeking change or an improvement in public disclosure are not engagement. This includes:
- Interactions with companies for data collection and/or for research purposes related to buy/ sell/ hold decisions;
- Standard questionnaires sent to companies for the purposes of information gathering and investment decision-making;
- Attendance at company presentations, AGMs or other company meetings without interactions or discussion, or where interactions are not seeking change or improved disclosure; and
- Bulk disclosure requests for ESG information, typically conducted via a third party.