Investment Stewardship

Investment stewardship is the oversight that investors exercise over the companies and other issuers they invest in, on behalf of the people whose money they manage. It covers monitoring company performance and governance, talking with boards and management, proxy voting at shareholder meetings, and, when needed, escalating concerns. Large asset managers usually run dedicated stewardship teams that publish policies, voting records and annual stewardship reports.

Stewardship sits in the chain between savers and companies. Pension funds, insurers and endowments (asset owners) hire asset managers, who buy common stock and bonds and therefore hold the rights attached to them. Stewardship is how those rights are used. It overlaps with corporate engagement, which is one of its main tools, and with ESG integration, which feeds the analysis behind it.

Think of a block of flats owned by hundreds of people who each own one flat. Most never attend the residents' meetings, so a few people who hold proxies for many owners end up deciding whether to fix the roof, change the caretaker or raise the service charge.

Fund managers are in a similar position. They own shares on behalf of millions of savers who will never attend a company's annual meeting. Stewardship is the job of turning up, asking questions and voting sensibly so that the building, the company, is well looked after for the long run.

• Monitoring. Following strategy, results, capital allocation, board quality and material risks, using the annual report, company meetings and research.
• Engagement. Holding private or collaborative dialogue with boards and executives on issues that affect long-term value.
• Voting. Casting votes on director elections, executive pay, mergers, auditor appointments and shareholder resolutions, guided by a published voting policy.
• Escalation. Voting against directors, co-filing resolutions, speaking publicly, joining other investors or, as a last resort, selling.
• Market-wide work. Responding to consultations and supporting standards on issues such as disclosure or financial materiality that affect all holdings.

Stewardship also applies to bonds, private markets and property, though the tools differ: bondholders have no vote at annual meetings but can negotiate terms when debt is issued or refinanced.

The United Kingdom published the first national code in 2010, after the 2008 financial crisis raised questions about how passive shareholders had been. The Financial Reporting Council (FRC) revised it in 2012 and substantially in 2020, when the UK Stewardship Code set 12 principles for asset owners and managers and 6 for service providers such as proxy advisers. The FRC published the UK Stewardship Code 2026 in June 2025, effective from 1 January 2026. It streamlined reporting and redefined stewardship as the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries; the 2020 reference to benefits for the economy, environment and society was moved out of the definition, which some commentators criticised. The code is voluntary but FCA-regulated asset managers must disclose their commitment to it.

Japan adopted a stewardship code in 2014 and many other markets followed. In the EU, the revised Shareholder Rights Directive (2017/828) requires asset managers and institutional investors to publish an engagement policy or explain why not. International principles are published by the International Corporate Governance Network (ICGN), and the PRI treats active ownership as one of its six principles.

The United States has no official code. Investors drafted the voluntary Investor Stewardship Group framework in 2017. Federal rules focus on voting: SEC Rule 206(4)-6 requires registered investment advisers that vote client proxies to adopt policies that put clients' interests first, and registered funds report their votes each year on Form N-PX. A fund's board of trustees oversees the voting policy used by its portfolio managers.

The growth of index mutual funds and ETFs has given the largest managers large stakes in almost every listed company. Because an index fund cannot sell a company it dislikes, stewardship is its main way to influence outcomes, and its assets under management give it a large share of votes. Critics argue this concentrates too much power in a few firms; others say index managers spend too little on stewardship relative to the stakes they hold. In response, several managers have introduced "voting choice" programmes since 2022 that let some end investors choose a voting policy themselves.

Stewardship priorities have also been contested politically. Climate change, board diversity and executive pay were common themes in the early 2020s, and groups such as Climate Action 100+ and the Net-Zero Asset Owner Alliance coordinated investor action. From 2023 support for environmental and social shareholder proposals fell, several US managers left collective climate initiatives in 2024 and 2025, and in February 2025 the SEC staff updated guidance on when engagement could make an investor ineligible for short-form "passive" ownership filings, which led some managers to change how they hold meetings with companies.

• Financial Reporting Council: UK Stewardship Code
• International Corporate Governance Network