As we enter 2025, investment stewardship faces a complex yet transformative landscape. Structural environmental and social changes, coupled with technological innovation and regulatory evolution are reshaping how investors approach long-term value creation. This playbook synthesises insights from leading research, industry surveys, and real-world case studies to adequately guide investors and stakeholders with actionable strategies, and enduring themes in driving meaningful Environmental, Social, and Governance (ESG) engagement and moreover maximising returns.

The New 2025 Stewardship Imperative:

Global challenges, including climate change, social inequality, and technological disruption are above all redefining investor priorities. Key insights and trends influencing stewardship in 2025 include the following:

1. Impact of ESG Engagement on Downside Risks:

ESG engagements, particularly on environmental issues like climate change, can significantly reduce downside risks for firms. Research published in the Review of Finance (2024) found successful engagements lowered firms’ Value at Risk (VaR) by 9% of the standard deviation. Consequently risk reductions were linked to fewer environmental incidents, highlighting the tangible benefits of ESG advocacy.

2. Focus on Technology Governance:

Engagements addressing AI ethics, data privacy, and digital rights are growing in prominence. Investors and civil society organisations (CSOs) are explicitly collaborating to influence corporate behaviour and mitigate risks in the tech sector, as highlighted in the Business & Human Rights Resource Centre’s analysis.

3. Investor Expectations in Engagements:

According to PwC’s 2024 Stewardship Investor Survey, 72% of investors believe stewardship activities will positively impact investment performance over the next three to four years. As a result, clear, strategic agendas and meaningful disclosures are critical for maximising engagement impact.

4. Evolving Regulatory Landscapes: 

In 2025, evolving regulations will redefine stewardship practices by prioritising transparency, accountability, and consequently sustainability. Enhanced disclosure requirements, such as the EU CSRD and anticipated SEC climate rules, will demand more detailed reporting on sustainability impacts. Taxonomy frameworks like the EU Taxonomy will guide investment alignment with sustainable goals, while anti-greenwashing measures, including Sustainable Finance Disclosure Regulation SFDR and FCA labelling rules, will ensure accurate fund representations. In addition, Stewardship Codes globally will foster better governance, and frameworks like The Taskforce on Nature-related Financial Disclosures (TNFD) will subsequently highlight biodiversity risks. These regulations will enhance engagement, streamline reporting, and therefore foster long-term value. They will consequently push investors to align strategies with compliance, sustainability, and measurable outcomes as key objectives.

Key Pillars of Effective Stewardship in 2025:

1. Strategic ESG Engagement

Stewardship teams will need to evolve their engagement strategies to achieve measurable outcomes. The success of these efforts depends on several factors:

• Prioritising Material Issues: Focus on high-impact areas like climate risk, board governance, and digital rights.
• Data-Driven Approach: Leverage analytics to identify high-impact engagement opportunities.
• Collaborating for Impact: Engage with policymakers, asset managers, and civil society organisations to amplify influence.
  

2. Risk Mitigation Through Active Ownership

Integrating ESG considerations into active ownership reduces risks and enhances value:

• Environmental Engagements: Firms engaged on climate issues, as shown in the Review of Finance (2024), achieved a 26% reduction in environmental incidents, validating the impact of targeted stewardship.
• Governance Reforms: Interventions like improving audit committee independence or linking executive pay to long-term goals can mitigate risks of fraud or mismanagement.

3. Maximising Engagement Impact

To maximise the value of engagements:

• Strategic Timing: Conduct offseason engagements to build relationships and clarify long-term goals. Use proxy season meetings to address immediate voting concerns.
• Customised Agendas: Tailor meeting agendas to align with investors’ stewardship themes and material risks.
• Enhanced Disclosures: Bridge the gap between sustainability efforts and long-term growth strategies. Over 55% of investors in the PwC survey expressed dissatisfaction with the quality of such disclosures.
  

4. Emphasising Long-Term Opportunities

Sustainability’s shift from constraints to opportunities can potentially unlock new pathways for growth:

• Energy Transition: Investments in decarbonisation and climate solutions support economic resilience and drive alpha.

• Circular Economy: Innovations in waste management, materials, and resource efficiency potentially create new revenue streams.

Emerging Themes for 2025:

While these are not the only themes shaping stewardship in 2025, they represent overarching material priorities driving impact:

1. AI and Digital Rights Governance

AI’s integration into ESG will significantly dominate shareholder proposals, demanding transparency, ethical oversight, and alignment with human rights principles.

• Key Actions:
  • Conduct AI impact assessments and advocate for ethical AI governance frameworks.
  • Engage portfolio companies to adopt robust AI policies aligned with global human rights standards.

• Example KPIs:
  • Percentage of portfolio companies with published AI governance frameworks.
  • Number of shareholder proposals addressing AI transparency and ethics.

2. Climate Change and Environmental Advocacy

Climate-related engagements will undoubtedly deliver the greatest benefits in reducing risks and fostering resilience.

• Key Actions:
  • Advocate for realistic emissions reduction targets and robust climate disclosures.
  • Encourage sustainable supply chains to mitigate environmental incidents.

• Example KPIs:
  • Reduction in reported environmental incidents across engaged companies.
  • Percentage of companies meeting science-based emissions reduction targets. 

3. Human Rights Due Diligence

Increasing regulatory momentum on human rights and environmental due diligence will moreover open new opportunities.

• Key Actions:
  • Ensure portfolio companies comply with emerging global standards like mandatory due diligence.
  • Engage on human rights risks in supply chains and critical materials sourcing.

• Example KPIs:
  • Proportion of portfolio companies conducting human rights impact assessments.
  • Instances of improved supply chain transparency and risk mitigation.

4. Policy and Collaborative Engagements:

Policy leadership and public-private collaboration will be essential for furthermore achieving sustainable investment goals.

• Key Actions:
  • Urge policymakers to set industry-specific transition frameworks and biodiversity targets.
  • Advocate for comprehensive adaptation strategies for climate resilience. For example, The Climate Action 100+ Initiative, which includes several UK-based asset managers, successfully engaged with over 160 companies globally, thus representing 80% of industrial emissions. Through collective action, the initiative has already driven significant progress in climate disclosures and emissions reductions.

• Example KPIs:
  • Number of policy initiatives influenced through stewardship engagements.
  • Amount of capital mobilised for biodiversity and climate adaptation investments.

5. Natural Capital and Biodiversity

Managing dependencies on natural ecosystems will become critical for long-term value creation.

• Key Actions:
  • Quantify risks, dependencies and impacts on natural capital.

• Example KPIs:
  • Percentage of companies reporting on biodiversity impacts and dependencies.

6. Private Markets Integration

Private assets will play a pivotal role in advancing sustainability goals.

• Key Actions:
  • Engage private equity firms to encourage emissions reporting and decarbonisation efforts.
  • Focus on renewable infrastructure investments with scalable impacts.

• Example KPIs:
  • Proportion of private equity investments with emissions reporting mechanisms.
  • Growth in renewable infrastructure projects within private market portfolios.

7. Macrostewardship: Driving Impact at Scale

Macrostewardship efforts will align stewardship themes with systemic goals to unlock collective impact.

• Key Actions:
  • Lead collaborative investor initiatives addressing global risks like biodiversity loss and social inequality. 
  • Align stewardship activities with global frameworks such as the United Nations’ Sustainable Development Goals (SDGs) and TCFD etc..

• Example KPIs:
  • Progress towards SDG-aligned outcomes within portfolio companies.
  • Participation in collaborative initiatives targeting systemic risks.

By focusing on these emerging themes with measurable KPIs, stewardship teams can therefore track progress, demonstrate accountability, and deliver impactful outcomes in 2025.

Integrate Proxy Voting with Engagement:

Proxy voting will continue to serve as a pivotal tool to influence corporate behaviour and align with evolving ESG priorities. Stewardship teams could amplify their effectiveness by integrating proxy voting with engagement strategies, therefore ensuring a unified approach to driving sustainable change. This alignment will subsequently reinforce ESG objectives and deliver consistent messaging to portfolio companies. As a result, key Actions for 2025 include: 

• Align Voting Policies: Stewardship teams should ensure voting guidelines directly reflect engagement priorities like climate action or board diversity.
• Increase Transparency: Teams should capture clear rationales for voting decisions, enhancing trust and showcasing ESG commitment.
• Track Voting Impact: Monitoring how votes influence corporate behaviours will allow teams to refine strategies for stronger future outcomes.
• Focus on Long-Term Value: Voting decisions should prioritise proposals that support sustainable growth and shareholder interests over short-term gains.
• Leverage Collective Action: Collaborating with other investors will strengthen voting impact on critical ESG issues, creating unified pressure.

By adopting these practices in 2025, stewardship teams could significantly better integrate proxy voting with engagements to drive impactful, sustainable results.

Measuring and Demonstrating Impact:

Stewardship teams will need robust metrics to assess and showcase engagement outcomes, thus combining qualitative and quantitative approaches. In addition, transparent reporting will build trust, demonstrate impact and consequently highlight the value of stewardship efforts to stakeholders.

1. What to Measure in 2025:

• Quantitative Metrics: Track ESG improvements, such as increased board diversity, emissions reductions, or enhanced sustainability targets.
• Qualitative Outcomes: Evaluate progress in governance practices, strengthened stakeholder relationships, and improved corporate accountability.
• Downside Risk Metrics: Use Value at Risk (VaR) and Lower Partial Moments (LPM) to measure risk reductions for engaged firms.
• Incident Data: Monitor reductions in environmental and social incidents to demonstrate real-world impact.
• Engagement Milestones: Use frameworks like the four-step milestone system (concern raised, acknowledgment, action taken, engagement closed) to measure engagement progress.

2. Key Actions for 2025:

• Publish Impactful Reports: Stewardship teams could share detailed stewardship reports with case studies and data-driven insights to demonstrate results.
• Leverage Visual Communication: Use infographics and charts to clearly communicate progress and outcomes.
• Highlight Success Stories: Showcase successful engagements, including divestments from companies failing to meet ESG standards.
• Track and Adjust: Monitor metrics to refine engagement strategies and ensure alignment with stewardship goals.

By implementing these practices in 2025, stewardship teams will effectively measure, communicate, and enhance the impact of their activities.

Tools and Resources for Effective Stewardship in 2025:

• Technology Platforms: Utilise tools like the Maanch Engagement Tracker to streamline engagement tracking and reporting.
• Collaborative Networks: Join initiatives such as the Investor Alliance for Human Rights and Climate Action 100+ to share resources and amplify influence.
• Educational Resources: Develop investor-specific materials to communicate ESG risks and opportunities effectively.

Conclusion: The Path Forward:

Stewardship in 2025 is about more than managing risks—it’s about fostering innovation, driving accountability and also creating value for all stakeholders. By aligning with investor expectations, leveraging technology, and addressing emerging challenges like AI ethics and digital rights, stewardship professionals can ultimately lead the way in a rapidly evolving landscape.

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