An effective accountability framework based on good stewardship, governance and reporting is vital to rebuilding trust in business.
Within this, transparency over stewardship of investments plays a fundamental role in providing confidence to a broad range of stakeholders. And across stakeholder groups, good stewardship is recognised as a critical tool for delivering value to investors.
EY’s new research into investor stewardship reporting and engagement has been designed to enable a better understanding of how UK-based asset managers and asset owners are currently reporting on, and engaging with, their investee companies on stewardship.
The report analysed recent stewardship reporting by the 30 largest UK investors who are signatories to the UK Stewardship Code (20 asset managers and 10 asset owners), and its findings provide a comprehensive picture of investor priorities and expectations, and offer unique insights about the journey toward more transparent reporting which promotes the safe investment of capital for the long-term.
Where investors are headed
The findings offer insight into how investors prioritised the various key focus areas, such as environment, corporate governance, social impact, human capital, and strategy and performance, using a five-point stewardship scale designed to measure depths of investor stewardship activity. The results suggest that not all focus areas were given the attention they needed.
Environment leads the list
Environment is a priority investors are calling the “defining issue of our time.” Climate change commands a vastly greater stewardship focus from asset owners than any of the other 24 stewardship sub-categories reviewed. However, greater transparency on investor polices and engagement outcomes is needed to help signal expectations and evolve the operating models of exposed business sectors more quickly.
Corporate governance is top priority
Corporate governance is another top priority on investors’ stewardship agenda. However, there are still opportunities for investors to better signal their expectations to investee companies, together with explanations of the consequences if these are not met. The 2018 UK Corporate Governance Code introduced new requirements for companies to report on their consideration of stakeholder interests and identify emerging risks, both of which present opportunities for deeper investor engagement.