Stewardship guidelines are helping institutional investors address climate risks and safeguard their investment in the long run, says Brian Minns, managing director of responsible investing at the University Pension Plan of Ontario.
“We need stewardship as [a way of] protecting the investments that we have and trying to enhance their value over time for our beneficiaries. It’s going beyond the initial investment decisions and thinking about how do we work with the things that we’ve invested in to help protect and enhance value over the long term.”
Read: Canadian pension plans endorse Canadian Coalition for Good Governance stewardship principles
A 2024 report from the WTW’s Thinking Ahead Institute found institutional investors need more accurate data to determine specific actions in stewardship. This data is expected to arrive by way of policy makers providing clear guidance and expectations with regards to stewardship resourcing practices and their disclosure.
According to the report, investors can address evolving systemic risks from climate change events through an impactful stewardship approach that includes issuer specific engagement, industry-wide initiatives and policy engagement.
“Yes, we have dialogues with individual companies, but we also have to be paying attention to these broader rules and regulations that impact many companies and whole economies,” says Minns. “Because the stronger they are . . . . the better opportunity we have, to achieve the investment returns we need for our members and beneficiaries.”
A separate report from WTW’s and the Principles for Responsible Investment found there’s an inadequate level of resources to advance stewardship among institutional investors. It found that the current level of resources allocated to stewardship tactics — engagement, voting, stewardship reporting, environmental, social, and governance data and metrics — need to double to match growing demand. The stewardship resourcing gap isn’t only about the quantity of options but also about skills and ongoing challenges in reporting data, it noted.
The report noted a lack of consistency with measurement of stewardship activities due to the absence of a standardized measurement practice for institutional investors. On a scale of one to six measuring stewardship ambition, asset owners scored, on average, 3.9.
“If investors approach stewardship from the mindset of its ability to help them have better outcomes for whoever their beneficiaries might be, then . . . . they’re going to be successful in devoting the appropriate resources,” Minns says.
Read: 91% of Canadian institutional investors say climate change is top ESG concern: survey