Introduction to Stewardship

What is stewardship?

Stewardship, also known as active ownership, is the use of influence by institutional investors to maximise overall long-term value including the value of common economic, social and environmental assets, on which returns and clients’ beneficiaries interest depend. It is a key aspect of responsible investing. 

How can investors action stewardship?

Ways through which investors can influence their target companies include; engagement, voting at shareholder meetings, filing shareholder resolutions, fulfilling direct roles on boards and litigation. 

Through engagement, investors can actively dialogue with current or potential investees or issuers on specific areas of concern. Engagement can take the form of meetings, calls, emails or letters between the investor and the company which has been targeted for engagement. Investors discuss their concerns and communicate their expectations of company boards and management teams.

Voting is a key tool for listed equity investors to signal their views to a company and often takes the form of approving director appointments and board pay. 

When investors believe that engagement strategies and dialogues have been ineffective or haven’t achieved intended outcomes, investors will often consider escalation strategies. These can take a number of forms including:

a. Filing shareholder resolutions.

b. Using voting power to replace unresponsive directors.

c. Pursuing litigation.

d. Speaking out publicly in the media to air specific concerns.

e. Divesting from a company