In the competitive world of investment management, large firms often dominate headlines and markets. However, small asset managers are increasingly carving out a niche by leveraging stewardship to drive ESG success and deliver outstanding value to clients. Smaller firms excel through agility, focus, innovative engagement strategies and tools. This guide explores how small asset managers can  transform stewardship into a strategic advantage, driving sustainable growth and deepening stakeholder trust.

The Challenges Faced by Small Asset Managers:

Small asset managers often grapple with resource limitations that make competing with industry giants challenging. These constraints can manifest as:

• Resource Limitations: 

Small asset managers often lack the extensive teams, budgets, and infrastructure available to larger firms, making it challenging to scale operations, conduct detailed ESG engagements, or meet increasing client demands for transparency and impact.

• Complex ESG Reporting and Compliance: 

The growing emphasis on ESG and stewardship comes with intricate reporting requirements and regulatory expectations. Smaller firms may struggle to allocate the necessary time and tools to track and demonstrate progress effectively.

• Perception Barriers: 

Investors may perceive larger firms as more reliable or better equipped to deliver results. This bias makes it harder for smaller managers to compete for attention, trust, and investment allocations, despite their unique advantages in agility and focus.

These challenges, though significant, can be addressed with the right strategies, tools, and focus on stewardship to differentiate and compete effectively.

Stewardship: The Great Equaliser

Stewardship, defined as the responsible management of assets to deliver long-term value, is gaining prominence across the investment landscape. Investors are increasingly prioritising asset managers who actively engage with portfolio companies to drive positive ESG outcomes. Regardless of the investor profile, investment stewardship is crucial for small asset managers because:

1. Value Creation: Engagement with companies helps identify and mitigate potential risks before they impact portfolio performance. Effective stewardship can lead to better long-term returns by addressing ESG risks and opportunities. 
2. Competitive Advantage: In a market dominated by large passive funds, active stewardship can be a key differentiator for smaller managers.
3. Client Retention: Demonstrating strong stewardship practices can build trust and loyalty among clients, crucial for smaller firms.
4. Regulatory Compliance: As stewardship becomes more regulated, having robust practices in place is essential for all asset managers.

This is where small asset managers can shine. Small asset managers attract diverse investors who value investment stewardship for distinct reasons.

• High-Net-Worth Individuals & Family Offices prioritise personalised strategies and alignment with their values. Stewardship demonstrates long-term wealth preservation and growth.
• Institutional Investors like pension funds and endowments value stewardship for managing ESG risks and achieving sustainable long-term returns.
• Niche Market Investors seek differentiated strategies in small-cap or emerging markets. Stewardship influences corporate governance, amplifying impact in less-researched areas.

Key Insight:

A 2023 report by the Investment Association revealed that over 65% of small and mid-sized asset managers in the UK actively integrate ESG principles into their investment strategies, with stewardship often being a core differentiator (Investment Association Report 2023).

Building Trust Through Authentic Stewardship:

Smaller portfolios mean more meaningful engagements with portfolio companies, fostering trust and collaboration. For smaller firms, authenticity is a powerful tool. Clients and stakeholders increasingly value genuine commitment to ESG principles, especially when backed by transparent actions and measurable outcomes.

Key Action: 

• Set Clear Objectives: Align stewardship efforts with specific ESG themes, such as renewable energy, ethical labour practices, or biodiversity.
• Demonstrate Accountability: Publish detailed reports showcasing engagement outcomes, metrics, and progress.
• Leverage Expertise: Highlight unique insights or sector knowledge that positions the firm as a trusted partner.

Case Study:  EdenTree Investment Management, a boutique UK-based firm, partnered with a mid-cap technology company to improve its supply chain sustainability. By focusing on this niche issue, EdenTree demonstrated authenticity and achieved measurable impact, including a 20% reduction in supply chain emissions within two years (EdenTree Report).

Specialisation: Turning Focus into Strength

With fewer assets under management, smaller firms can tailor their stewardship activities to align with the specific needs and goals of each investment.  Specialisation allows small asset managers to stand out in an increasingly crowded ESG market. By concentrating on a specific sector, issue, or geography, these firms can develop unmatched expertise and deliver targeted stewardship.

Key Action: 

Identify a stewardship niche that aligns with the firm’s mission and market opportunities. Examples include:

• Climate transition strategies for high-growth startups.
• Governance improvements in emerging markets.
• Promoting diversity and inclusion in underrepresented industries.

Case Study: Impax Asset Management, a small UK-based asset manager specialising in renewable energy projects, leveraged its sector expertise to drive impactful engagements. Between 2021 and 2023, Impax successfully influenced 15 portfolio companies to adopt science-based targets, contributing to an aggregate reduction of 1.5 million tonnes of CO2 emissions (Impax Case Studies).

Collaboration: Strength in Numbers for Small Asset Managers

Collaborative stewardship amplifies the voice of small asset managers, enabling them to influence larger companies and address systemic ESG issues. By joining forces with peers, these firms can pool resources and share expertise.

Key Action:

• Join Initiatives: Participate in global coalitions like Climate Action 100+ or the UK-focused Investor Forum (Climate Action 100+).
• Engage with Stakeholders: Work with clients, NGOs, and policymakers to align on ESG priorities.
• Share Best Practices: Exchange insights with other small asset managers to refine strategies.

Case Study: Rathbone Greenbank Investments joined forces with several European asset managers through Climate Action 100+ to influence a multinational retailer’s human rights practices. The coalition’s efforts led to the company adopting comprehensive human rights policies, showcasing the power of collective action and winning a few awards in 2023 (Rathbone Greenbank).

Measuring Progress – The Role of Data and Transparency

Transparency is a hallmark of effective stewardship. Small asset managers who track, measure, and report their ESG engagements can build credibility and demonstrate impact with ease.

Key Actions:

• Track Key Metrics: Monitor changes in portfolio company practices, such as emissions reductions, improved diversity initiatives, or governance reforms.
• Align with Standards: Ensure alignment with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) or the Sustainable Finance Disclosure Regulation (SFDR) or the UK Stewardship Code 2020. 
• Use Data Analytics: Leverage technology to generate real-time insights and streamline reporting processes, making ESG progress tangible and actionable.

Leveraging Technology for Scalable Stewardship in Small Asset Managers:

Asset managers can boost margins and maximise stewardship potential by differentiating products and leveraging efficient tools. This is where platforms like Maanch come into play. Designed to empower asset managers of all sizes, Maanch provides solutions that make stewardship more impactful and efficient.

1. Simplifying Engagement Tracking

Maanch streamlines the process of tracking engagement activities. By centralising data and creating user-friendly dashboards, it allows small asset managers to:

• Monitor their interactions with portfolio companies in real-time.
• Identify trends and gaps in engagement efforts.
• Ensure alignment with ESG goals and regulatory requirements.

2. Enhancing ESG Reporting

Transparency is a critical component of effective stewardship. With Maanch, small asset managers can:

• Generate detailed ESG reports tailored to stakeholder needs.
• Showcase measurable impact in areas like carbon reduction, diversity, and governance improvements.
• Build credibility by demonstrating a commitment to data-driven stewardship.

3. Providing Data-Driven Insights

Data is the foundation of effective decision-making. Maanch empowers asset managers by providing actionable insights that inform their strategies. From analysing ESG trends to benchmarking performance, these insights allow small firms to stay ahead of the curve.

By leveraging technology, smaller asset managers can amplify their stewardship efforts, positioning themselves as leaders in responsible investing.

Regulatory Alignment: Staying Ahead of Compliance

In an environment of increasing regulation, small asset managers must remain agile to adapt to new requirements. Staying ahead of regulatory trends not only ensures compliance but also demonstrates leadership in stewardship.

Key Trends to Watch:

• Enhanced disclosure requirements under the UK Green Finance Strategy (UK Green Finance Strategy).
• Evolving expectations under the UK Stewardship Code 2020 (UK Stewardship Code).
• Growing focus on greenwashing prevention and ESG authenticity. 

Key Action: Regularly review and update stewardship policies to align with regulatory changes. Engage with industry groups like the Investment Association to stay informed about emerging compliance requirements.

Why Small Asset Managers Matter:

Despite their size, small asset managers play a pivotal role in driving ESG progress. Their ability to specialise, innovate, and collaborate positions them as key players in the stewardship landscape. Moreover, their personalised approach often delivers deeper impact and stronger client relationships than larger counterparts can achieve.

Key Insight: Morningstar’s 2022 Sustainable Funds Report found that 72% of funds managed by smaller firms achieved above-average sustainability scores, outperforming many larger asset managers (Morningstar Report 2022).

Conclusion

Stewardship is no longer optional for asset managers; it’s essential. For small asset managers, it’s a game-changer. By focusing on stewardship, these firms can compete effectively with larger rivals, drive sustainable growth, and build lasting trust with stakeholders.

With tools like the Maanch platform, small asset managers can overcome resource constraints and amplify their impact. From simplifying engagement tracking to enhancing ESG reporting, technology empowers smaller firms to turn stewardship into a strategic advantage.

The future of asset management belongs to those who embrace stewardship. By doing so, small asset managers don’t just keep up with the giants—they outperform them.

Are you ready to unlock the full potential of stewardship? 

Book a Demo for the Maanch Engagement Tracker and discover how it can help amplify your impact, enhance client trust, and outperform industry giants.