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 tools and activities:
Investors can fulfil their stewardship obligations through various methods. These stewardship tools and activities can be split into investee stewardship and broader stewardship. Many of these tools and activities can be used collaboratively by investors.
Tools and activities for investee stewardship differ by asset class, but can include:
- engagement with investees (both current and potential),
- voting at shareholder meetings,
- filing, co-filing, or submitting shareholder resolutions or proposals,
- nomination of directors to the board,
- leveraging roles on the board or on board committees,
- direct oversight of portfolio companies or assets, and
- litigation.
Tools and activities for broader stewardship can include:
- policy engagement,
- engagement with standard setters,
- engagement with industry groups,
- negotiation with and monitoring of the stewardship actions of intermediaries in the investment chain, e.g. asset owners engaging external managers, limited partners engaging general partners,
- engagement with other stakeholders, e.g. NGOs, workers, communities, and other rights-holders, and
- contributions to public goods (e.g. publicly available research) or to public discourse (e.g. through the media) that supports stewardship goals.
Frequently asked questions
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)
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.
PRI has a work programme on fiduciary duty and on the legal frameworks for impact.
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.
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.
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.
