What is stewardship and what does it mean for your investments?

Stewardship is essentially about looking after something responsibly. It means managing something on someone else’s behalf and making decisions with their best interests in mind. 

When it comes to investments, investment managers act as ‘stewards’ of their customers’ money, managing it carefully to protect it and help it grow over time. This means looking beyond short-term gains and thinking about what could affect the value of customers’ money in the future – such as economic factors, environmental challenges, and social issues that can all shape long-term growth.

In this article, I’ll explore some key aspects of stewardship and how they may play a role in your investments.

Engagement with companies

Engagement is a form of communication with a company, through which investors can express their views and encourage improvement on things like business strategy, emerging risks or other matters which could affect the value of the investment. This can include environmental, social and governance (ESG) issues, such as: 

• Environment: This could involve discussing how a company plans to transition to net zero (which means adding no more greenhouse gases to the Earth's atmosphere than the amount you're taking out).
• Social: This could involve encouraging a company to improve employee working conditions. 
• Governance: This could involve encouraging a company to increase the percentage of women on its board.

Engagement can take several different forms, including writing letters to CEOs/senior management or holding meetings. This could be one-on-one with a company or in collaboration with other investors.
 

Voting at company meetings

Another way that investors can encourage companies to make positive change is through voting. Most companies have annual general meetings (AGMs) where investors can attend and make their voices heard, either as an escalation of engagement activity, to express support for an ongoing strategy or to ensure suitable governance is in place to deliver on the ESG factors listed above.

Influencing industry and policy

Strong, well-functioning markets are essential for delivering long-term investment performance and delivering positive financial outcomes for customers, and supporting the broader economy. 

Investors can play an important role in helping to address systemic risks that threaten entire markets and economic systems. While the 2008 Financial Crisis is a very well-known example of this, ESG issues such as climate change also pose market-wide challenges. Investors can collaborate through coalitions, non-profit organisations and industry associations to drive forward standards and frameworks. They can also engage with policymakers, regulators, and industry stakeholders to drive change that benefits savers.

Interested in learning about our stewardship approach?

I hope this article has given you a clear idea of what stewardship is and what it means for your investments. While the aspects of stewardship outlined are common features of investment managers’ stewardship approaches, they of course all have nuances. If you would like to learn more about our stewardship approach at Scottish Widows, you can access our most recent responsible investment and stewardship summary report 2024 (PDF, 3MB).