Forceful stewardship complements the normal approach to responsible investing – in which traditional investment decision-making is overlaid with a filter for environmental, social and governance issues – by focusing on the rights that investors have as owners. But forceful stewards also go beyond private engagements with investee companies, which lack transparency and are hampered by conflicts of interest. We are deeply pro market. But as experienced insiders, we know there are many reasons why the financial industry ignores systemic risks, such as climate change, until it’s too late.
“Forceful stewards” engage with companies, and use their full influence to make business part of the solution to address systemic risks. They vote for resolutions to send a public signal and thus to drive deeper and faster corporate change. And forceful stewards also engage with all the other players involved in investment – from research analysts to investment consultants to regulators – to ensure they, too, play their part in addressing systemic risks.
In summary, a forceful steward does three things:
- Indicates in advance a willingness to vote in favour of resolutions requesting action to address systemic risks, and to vote against management if the company has repeatedly failed to take action to limit systemic risk.
- Makes it clear in private engagements with board directors and senior executives that box ticking will not be sufficient; results matter and should match the urgency of the situation.
- Requires fund managers, sell-side research, credit rating agencies, and investment consultants to review corporate disclosures and advise on portfolio implications. And advocates for essential regulatory changes that align incentives in financial markets with risk mitigation and long-term wealth creation.