A quick guide to investment stewardship

Investment stewardship has evolved into a critical function for asset managers, institutional investors, and financial fiduciaries. With increasing emphasis on environmental, social, and governance (ESG) factors, regulatory compliance, and shareholder engagement, effective stewardship is no longer optional—it’s a necessity.

This guide provides an overview of investment stewardship, its key components, regulatory frameworks, best practices, and the role of technology in enhancing stewardship activities.

1. What is investment stewardship?

Investment stewardship refers to the responsible management of assets through active ownership, proxy voting, corporate engagement, and adherence to ESG principles. It ensures that investment decisions align with long-term value creation and sustainable business practices.

Key aspects of investment stewardship:

• Proxy voting – Exercising voting rights to influence corporate governance decisions.

• Corporate engagement – Communicating with company boards and executives on material governance and sustainability issues.

• Public policy & systems engagement – Advocating for regulatory, policy and marketwide improvements that align with responsible investment principles.

• ESG integration – Assessing environmental, social, and governance risks in investment decisions.

• Regulatory compliance – Adhering to stewardship codes and financial regulations.

  
  

2. Why investment stewardship matters

Investment stewardship is essential for ensuring sustainable business practices, mitigating risks, and driving long-term financial performance. Its importance is underscored by:

• Regulatory expectations: Compliance with frameworks like the UK Stewardship Code, the EU Shareholder Rights Directive II (SRD II), and the Financial Conduct Authority’s ESG disclosure requirements.

• Stakeholder influence: Growing pressure from investors, stakeholders, and activists for responsible corporate behaviour.

• Risk mitigation: Proactive engagement helps investors address governance risks before they escalate.

• Long-term value creation: Companies with strong governance and ESG practices often outperform their peers.

• Measuring impact: Capturing engagement progress ensures accountability and allows investors to adjust strategies based on real-time insights.

  
  

3. Key regulatory frameworks and stewardship codes

Various regulations and stewardship codes guide institutional investors in their fiduciary responsibilities. Notable frameworks include:

• UK Stewardship Code (2020): Sets principles for responsible investment in the UK.

• EU Shareholder Rights Directive II (SRD II): Strengthens shareholder engagement in EU-listed companies.

• Principles for Responsible Investment (PRI): A UN-supported framework for incorporating ESG factors into investment decisions.

• Financial Conduct Authority (FCA) ESG Regulations: Increasing focus on transparency in corporate governance and ESG reporting.

  
  

4. Best practices for effective investment stewardship

1. Establishing a clear stewardship policy: Investors should develop and publish a stewardship policy outlining their approach to corporate engagement, proxy voting, and ESG integration.

2. Active corporate engagement: Engage with portfolio companies to address governance concerns, executive remuneration, climate risks, and social impact issues.

3. Data-driven proxy voting: Use technology and research to make informed proxy voting decisions that align with long-term shareholder interests.

4. ESG performance monitoring: Continuously track and assess ESG-related risks and opportunities within investment portfolios.

5. Transparent reporting & disclosure: Regularly report stewardship activities and outcomes to stakeholders, demonstrating accountability and impact.

6. Capturing engagement progress: Monitoring engagement activities and tracking their outcomes is critical for demonstrating impact and refining stewardship strategies. A robust SaaS platform can help investors log interactions, measure progress, and generate real-time reports on engagement effectiveness.

5. The role of technology in investment stewardship

Advancements in technology have transformed investment stewardship, making processes more efficient and data-driven. Key innovations include:

• AI & machine learning: Identifying ESG risks and shareholder sentiment.

• Proxy voting automation: Streamlining the voting process for large institutional investors.

• Blockchain for transparency: Enhancing traceability and trust in corporate governance actions.

• Data analytics: Leveraging big data for more informed stewardship decisions.

• Engagement tracking platforms: Our SaaS platform enables investors to capture engagement progress, track corporate interactions, and measure the effectiveness of stewardship activities. With real-time reporting and analytics, investors can ensure their engagement efforts align with their strategic objectives.

  
  

Conclusion

Investment stewardship is a cornerstone of responsible investing, ensuring that shareholders influence corporate behaviour for long-term value creation. As ESG concerns and regulatory requirements grow, institutional investors must adopt best practices, leverage technology, and enhance transparency in their stewardship activities.

By implementing a strong stewardship framework and utilising advanced tracking tools, investors can not only mitigate risks but also contribute to a more sustainable and accountable financial ecosystem.

Next Steps: To enhance your stewardship strategy, consider adopting an advanced stewardship platform such as Impactive that simplifies engagement tracking, proxy voting, and ESG compliance.

About Us

The Impactive Platform is a leading SaaS platform for investment stewardship, providing cutting-edge tools for proxy voting, engagement tracking, and ESG compliance. Contact us to learn how we can help streamline your stewardship activities.