Enhancing Stewardship: A Call for Modernization
In a bid to centralize and structure public engagement activity across the investment ecosystem, Impactive Tech recently launched its Stewardship Intelligence tool. The tool aims to address the challenges of engagement in sustainability issues, which have been identified as fragmented, duplicative, and difficult to measure in terms of real-world outcomes.
The need for a 'systemic reset' of sustainable investing, as emphasized by the Sierra Club's Ben Cushing, is evident. To mature, stewardship must be underpinned by informed dialogue and credible, data-driven preparation. This is crucial in an environment where over 1,400 separate and overlapping initiatives, coalitions, working groups, taskforces, or standards are involved in responsible investment.
Collaborative Engagement and Coordination
Stewardship effectiveness can be enhanced by collaborating with other investors and stakeholders to avoid fragmented and duplicative engagement efforts. Collective engagement initiatives allow investors to pool resources and coordinate their active ownership activities, magnifying their influence while reducing redundant work.
Integration of ESG Factors into Investment Processes
Embedding financially material environmental, social, and governance (ESG) factors into investment analysis systematically helps create a holistic understanding of risks and opportunities. This can be accomplished through frameworks where portfolio managers adopt approaches such as ‘Assess, Adapt, Amplify, Aim for Impact, or Avoid’, aligning stewardship actions with corporate financial performance and long-term value creation.
Use of Technology and Data for Enhanced Monitoring and Reporting
Leveraging technology platforms that integrate financial and ESG performance data in a shared, transparent dashboard can reduce fragmentation by streamlining information sharing and collaboration. Advanced AI and data capabilities, such as duplication detection and outcome measurement tools, can provide real-time insights on stewardship effectiveness and help focus engagement on material issues.
Developing Standardized Metrics and Outcome Measurement Tools
Improving the ability to measure real-world sustainability outcomes requires common frameworks and metrics that consistently track ESG impacts. These tools allow stewardship efforts to be evaluated quantitatively, making it easier to demonstrate long-term value and align stewardship goals with client objectives.
Policy and Regulatory Reform to Support Stewardship Objectives
Supportive policy reforms can enable investors to improve sustainability outcomes by clarifying fiduciary duties and encouraging active stewardship. Such reforms reduce legal ambiguities and provide a structured environment for collaborative and outcome-focused stewardship activities.
Top-down Expertise Combined with Bottom-up Integration
Combining bottom-up integration of ESG risks and opportunities by portfolio managers with top-down expertise from stewardship groups creates a dynamic process of continual innovation and improvement across an investment platform, enhancing both efficiency and effectiveness.
These approaches help reduce duplication and fragmentation by fostering a coordinated, data-driven stewardship ecosystem that prioritizes measurable, long-term sustainability outcomes. However, successful implementation requires alignment of incentives among investors, clear regulatory frameworks, and widespread adoption of technology-enabled collaboration tools, which remain ongoing challenges.
Investors need to be able to answer five basic questions: Who else has engaged this company on this issue? Has the company responded or made a public commitment? What additional value can our engagement bring? Is there a collaborative effort we can join, rather than acting alone? What's the company's track record on responsiveness? Shared infrastructure can track past engagements, company responses, and material outcomes, reducing duplication of effort among investors.
Stewardship must be embedded within investment teams with clear lines of responsibility, proper governance, and support from specialist functions. The future of stewardship lies in smarter workflows, better feedback loops, and systems that turn intention into intelligence.
References
[1] Coller FA, Vogel G, Waddell S. The Activist Investor’s Guide to Sustainable Investing. 2020. [2] McKinsey & Company. The future of active ownership. 2020. [3] Stewardship 2.0: Redefining the Role of Investors. 2020. [4] ESG Integration in Investment Decision Making: A Review of the Evidence. 2019. [5] Investor Stewardship Group. 2019.
- To ensure a comprehensive approach in engagements of sustainability issues, technology can be utilized for enhancing monitoring and reporting by integrating financial and ESG performance data in a shared, transparent dashboard. This may involve measures such as duplication detection and outcome measurement tools to provide insights on stewardship effectiveness and focus on material issues. (Use of Technology and Data for Enhanced Monitoring and Reporting)
- In order to overcome fragmentation and duplication in responsible investment, it's essential for investors to work collaboratively with other stakeholders and pool resources through collective engagement initiatives. By coordinating their active ownership activities, investors can magnify their influence while reducing redundant work. (Collaborative Engagement and Coordination)
