These two covering trends, the Growth of index investing and the Rise of sustainability in investing, make asset managers play a more important role in corporate governance than ever before.
The use of sustainability information aligns with investor's growing stewardship responsibilities.
Stewardship codes were first introduced in 2010 in the UK, formalizing an enhanced expectation of investor's role in corporate governance. Such codes are based on the logic fiduciary duty. They offer a framework of principles that investors can apply to their corporate stewardship activities : Stewardship codes generally require institutional investors to be transparent about their investment process, engage with investee companies, and vote in shareholder meetings.
Stewardship codes and global investor demand for sustainability information are shaping a new practice that emphasize the fiduciary responsibility of asset managers to be stewards of capital markets, not just stewards of their own investments.
Stewardship codes naturally promote stronger coordination among investors and investees in addressing ESG-related risks and opportunities.
Stewardship codes often encourage better disclosure with more standardized metrics to make it easier for investors to understand the material ESG issues relevant to a company.
Sources: SASB
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