On April 30th, London’s Bush House hosted an engaging gathering, “The Varieties of Investor Stewardship.” This blog summarises the event’s highlights, encapsulating key discussions led by thought leaders in the investor stewardship landscape. The sessions explored emerging trends, essential actors, innovative strategies, and specific sector challenges within the stewardship ecosystem.

Re-imagining Investor Stewardship: Running Themes and Emerging Trends

• Dionysia Katelouzou opened the event by discussing the evolving paradigms in investor stewardship. She highlighted how transparency, accountability, and active engagement are gaining momentum. She also pointed out the increasing integration of ESG factors into investment strategies as a transformative trend influencing global markets.

Exploring the Stewardship Ecosystem: Actors and Levels:

• Panellists: Susan Hooper (Chair, Senior Director), Kimberley Lewis (Head of Active Ownership, Schroders), Erica Serpico (Director, Investment Stewardship, Vanguard), Harlan Zimmerman (Senior Partner, Cevian Capital)

• Moderator: George Dallas (Head of Content, European Corporate Governance Institute)

• This panel dissected the multi-layered stewardship ecosystem ranging from institutional investors to individual activists. Discussions emphasised the collaborative efforts required to foster sustainable corporate practices, showcasing how active ownership is instrumental in driving significant corporate change.

Actors & Levels:

1. Executive Compensation: 

The discussion emphasised the difficulty of aligning executive remuneration with long-term sustainability goals. Integrating management incentives with strategic goals and aligning with CEO tenure, is seen as a pathway to more sustainable outcomes.

2. Focus on Materiality:

The focus is shifting towards ensuring that governance structures and company boards prioritise material impacts on their long-term interests. The need for quantifiable and relevant factors becomes paramount as investors seek strategies that genuinely drive substantive change. Additionally, the diversity of perspectives among analysts on the same company enriches understanding, allowing for a deeper comprehension of unintended consequences and material risks.

3. Stewardship and Sustainability: 

The distinction between stewardship and sustainability is becoming more defined. There is a clear focus on long-term factors that influence governance, operational improvements, financial changes, and sustainability potential. 

4. Impact of Technology on Stewardship:

Technology is significantly transforming the stewardship landscape, enhancing the efficiency of processes like portfolio management and voting. The use of AI and data analytics is becoming prevalent, aiding in making informed decisions about which companies to engage with and how to manage vast portfolios with varying degrees of active involvement.

5. Challenges of Passive Management and Regulatory Impacts

With the growth of passive investments, the market sees a shift towards high-level, specialised challenges. These include how to maintain competitiveness in the UK market amidst regulatory changes. There’s a growing need for transparency, particularly around real-time votes post-AGM and the overall effectiveness of stewardship disclosures. Finally, the discourse considered whether regulatory interventions are supporting or hindering the advancement of stewardship goals. Concerns were raised about the potential for regulations to lead to a ‘tick-box’ culture that may not genuinely enhance stewardship efficacy. The conversation highlighted the ongoing need to balance regulatory requirements with the practical realities of market dynamics and investor capacities.

Varieties of Metrics, Targets and Outcomes in Investor Stewardship:

• Panellists: Jennifer Law (Head of Stewardship, Newton Investment Management), Diandra Soobiah (Head of Responsible Investment, Nest), Nick Stansbury (Head of Climate Solutions, Legal & General Investment Management), Alexis Wegerich (Head of ESG Analytics, Norges Bank Investment Management).

• Moderator: Anna Tilba (Professor, Durham University)

This session laid out the diverse metrics used to measure the effectiveness of stewardship activities. Setting realistic targets and evaluating outcomes, stressing the importance of clear benchmarks and transparent reporting was highlighted. `From stewardship being a rarely mentioned concept to its central role in investment strategies illustrates profound changes in the field. 

Investors, asset owners, and managers now face the challenge of producing impactful environmental and social outcomes alongside financial returns. This complexity has led to stewardship that includes various asset classes and emphasises engagement with policymakers on systemic issues. In the context of stewardship, maintaining consistency helps to establish what constitutes effective practice.

The discussion also highlighted the increasing significance of adopting collaborative stewardship. There is an ongoing tension between traditional fund manager mandates, which focus on financial returns and a comprehensive approach. This evolution points to a future where stewardship involves proactive engagement and a deep commitment to sustainable investment practices.

Varieties of Strategies in Investor Stewardship:

• Panellists: Steven Friel (CEO, Woodsford), Catriona Glascott (Lawyer, ClientEarth), Gavin Grant (Head of Governance, Baillie Gifford), Lewis Johnston (Director of Policy, ShareAction), David Trenchard (David Trenchard Consulting Ltd.).

• Moderator: Eva Micheler (Professor, LSE)

• This detailed and dynamic panel discussion delved into the evolving challenges and strategies in the realm of investment decision-making. A significant portion of the conversation focused on the transformation of stewardship practices. The panellists highlighted the shift towards ensuring that company boards and governance structures adequately reflect material considerations for long-term interests. The increasing importance of quantifiable outcomes and relevance in investment decisions was underscored, pointing to a metrics-driven approach to stewardship.

Applying the Lessons: Stewardship in High Emission Sectors:

• Panellists: Sofia Bartholdy (Responsible Investment Integration Director, Church Commissioners for England), Bruce Duguid (Head of Stewardship, Federated Hermes EOS), Ben Mathews (Company Secretary, BP), John Teahan (Portfolio Manager and Partner, Redwheel).

• Moderator: Tom Gosling (London Business School)

• This panel focused on the unique challenges of implementing stewardship principles in high-emission industries. Practical examples from sectors like oil and gas highlighted how stewardship can lead to significant environmental improvements and align with global climate goals.

Navigating Fixed Income and Sovereign Stewardship:

• Panellists: Eugenia Unanyants-Jackson (Global Head of ESG, PGIM), Victoria Barron (Co-chair of ASCOR), Esther Law (Senior Portfolio Manager EM Debt and Responsible Investing Lead),Magali Van Coppenolle (Global Head of Policy, Climate Bonds Initiative).

• Moderator: Carmen Nuzzo (Executive Director Transition Pathway Initiative Centre, LSE)

• The event concluded with a deep dive into the less-explored areas of fixed income and sovereign stewardship. The discussion explored the unique challenges and strategies associated with these investment types, advocating for tailored stewardship approaches to maximise impact.

Conclusion and Future Steps:

The event closed with a forward-looking perspective, stressing the critical role of continued innovation and adaptation in investor stewardship. Attendees left with a reinforced understanding of the stewardship landscape’s complexity and the collective responsibility to foster ethical investment practices that contribute to a sustainable future.