The Shareholder Commons

In November 2023, the CFA Institute, Global Sustainable Investment Alliance, and Principles for Responsible Investment released "Definitions for Responsible Investment Approaches." These “harmonized definitions” include a definition of “stewardship” that encourages investors to understand that one essential element of stewardship is to “protect and enhance overall long-term value for clients and beneficiaries, including the common economic, social, and environmental assets on which their interests depend.” The definition continues, explaining: "The concept of overall value for clients and beneficiaries is multifaceted. It includes the market value of the entire portfolio (as opposed to individual holdings or individual mandates); the long-term value-creation capabilities of firms and economies; and the common environmental, natural, intellectual, social, and institutional assets that underpin all economies." #SystemStewardship Susheela Peres da Costa Christopher Fidler Nathan Fabian David Atkin Margaret Franklin, CFA Simon O'Connor Paul Andrews Nicole Gehrig Robin Willis Jane Ambachtsheer Bryan McGannon Mary Robinson, CFA Lisa Woll Michal Bartek, CFA Toby Belsom Lauren Green Kelly Krauter Clara MELOT René van Merrienboer Eilidh Wagstaff

Institute for Energy Economics and Financial Analysis (IEEFA) released a paper in September 2024 entitled "Universal Ownership: Decarbonisation in a Hostile Engagement Environment." Using the term “universal owner” to convey an idea similar to “long-term, diversified investor,” this paper explains the need for diversified owners to engage portfolio companies on systemic issues. IEEFA explains that “[u]niversal owners are unable to avoid risks that ultimately affect the entirety of the economic system to varying degrees, meaning they must seek to reduce ‘systemic risk’ to protect beta (market) returns. This will often mean addressing the externalities caused by entities held within the universal owner’s own portfolio.” Focusing on environmental issues and the increasingly “hostile” environment in which stewardship teams must operate, IEEFA’s paper highlights what it describes as a “mixed track record” of enterprise value-focused engagement strategies. The report proposes systemic-focused engagement strategies as solutions to the conundrum of engaging a company when a win-win solution is unlikely. #SystemStewardship #UniversalOwnership Alasdair Docherty

Oxfam and Rights CoLab recently released their report, "The Investor Case for Fighting Inequality: How Inequality Harms Investors and What Investors Should Do About It." Focused on the sources and outcomes of socioeconomic #Inequality, this paper serves to alert investors to the growing body of evidence showing that investors must tackle inequality for the sake of their investments, and it argues that the factors exacerbating inequalities lead to both enterprise-level risks and “broader systemic harms to the macroeconomy that companies and investors must absorb”: "In particular, there is now mounting evidence that inequality is a systemic risk that affects the financial system, the macroeconomy, and the total portfolios of large, diversified investors. Inequality increases the probability of financial crises and, under various conditions, can depress the growth rate of the economy. Inequality is also intertwined with other risks to the financial system, such as climate change, food insecurity, pandemics and other health burdens, polarization and social unrest, corruption, and the erosion of democracy and the rule of law. The largest mainstream investors are diversified owners of thousands of assets, making them significantly more exposed to market risk than to the risk of any one issuer." #SystemStewardship Paul Rissman Joanne Bauer Irit Tamir Sharmeen Contractor Silvana Zapata-Ramirez Nabil Ahmed Hana Ivanhoe Diana Kearney Julia Falkow

International Sustainability Standards Board (ISSB), the international sustainability reporting standard setter, has published a research design paper that suggests they’re open to using a portfolio lens in their approach, and which also includes sustainability-related financial disclosures that go beyond those relating solely to enterprise value. Our CEO, Rick Alexander, explained the importance of this development in a recent article in ESG Investor (https://lnkd.in/ey4mDSWi): "The [ISSB] paper signals that the international group most identified with financial disclosure is (finally) thinking about closing that gap. This could serve as a critical step in recalibrating the financial system to account for the true cost of the goods and services produced in our economy. If social and environmental disclosures clearly call out the threats that companies are imposing on investors’ portfolios, investors will have the information they need to steward companies away from such conduct, and to address some of the other elements of the financial system that encourage irresponsible behaviour." #SystemStewardship Bob Massie Paul Rissman Matthew Rusk Matt Patsky Julie Gorte Josh Zinner Joanne Bauer Caroline Flammer Allen L. White Adam Kanzer Janine Guillot Rommie Johnson Charlotte Lush Katie Schmitz Eulitt, INSEAD MBA, GCB.D Himani Phadke

Our latest newsletter addresses how a systemic perspective strengthens shareholder stewardship. In it, we highlight increased attention to and support for portfolio-level risk and #SystemStewardship arguments, and we cite examples of this appearing in articles and reports from Oxfam, Rights CoLab, Institute for Energy Economics and Financial Analysis (IEEFA), CFA Institute, Global Sustainable Investment Alliance, Principles for Responsible Investment, and International Sustainability Standards Board (ISSB). We also provide guidance on how to integrate system stewardship into feedback on ISS | Institutional Shareholder Services' open comment period, with details on a webinar on the topic we're co-hosting with Majority Action, the Racial Justice Investing Coalition, and Interfaith Center on Corporate Responsibility (ICCR). We further include details on a webinar at which our CEO Rick Alexander is speaking alongside Tom Gosling, Rickard Nilsson, and Xander Urbach, hosted by Esgaia. And last but not least, we offer details on how to donate to TSC as you consider your end-of-year giving plans. Give it a read and let us know what you think! https://lnkd.in/eS6PDNbZ Diana Kearney Sharmeen Contractor Paul Rissman Joanne Bauer Paul Chandler Whitney Shepard Laura D. Josh Zinner

We hope you can attend this upcoming webinar in which our CEO Rick Alexander will join Tom Gosling, Xander Urbach, and Rickard Nilsson in what is sure to be a lively conversation. Rick will explain why #SystemStewardship is essential for fiduciaries who aim to optimize returns for their beneficiaries and clients. #FiduciaryDuty

This new report from the Global Sustainable Investment Alliance urges investors to "[h]ighlight the difference in incentives between asset managers and asset owners," noting, "Asset owners should ensure managers focus on the end use or beneficiaries – this should feature prominently in asset owner mandates." The report further recommends that #AssetOwners "[d]evelop more comprehensive and long-term focused mandates for asset managers, incorporating sustainability and systemic risk considerations, and consider how to manage asset managers on a longer-term basis rather than traditional quarter-by-quarter reporting." We couldn't agree more, which is why we have developed model language that can be adapted to use in an #AssetManagement mandate?to ensure the manager is authorized to practice #SystemStewardship: https://lnkd.in/eJtVKVtT.

This excellent report from the Global Sustainable Investment Alliance enjoins investors to "[e]volve understanding of fiduciary duties to consider the impact on the broader economy and society (e.g., the world's carrying capacity), in alignment with the interests of diversified shareholders." We couldn't agree more. Freshfields has produced an excellent report on the topic (read it here: https://lnkd.in/eM-9dW-A), and we have prepared a summary that focuses on the #SystemStewardship aspects here: https://lnkd.in/ePwxVdUq. #FiduciaryDuty The Generation Foundation Principles for Responsible Investment Grace Eddy Alison Paton David Rouch Paul Chandler

This excellent report from the Global Sustainable Investment Alliance enjoins investors to "[r]ecognise that all investments have an impact on the real world and adjust investment strategies accordingly by aligning voting and engagement strategies with systemic goals. For example, investors could vote or collectively engage to remove directors at companies that do not have credible plans to align with the goals of the Paris Climate Agreement." We couldn't agree more. That's why we encourage investors to support our #Guardrails on #AntimicrobialResistance and #PovertyWages (see more at https://lnkd.in/e3D7DDBg and https://lnkd.in/erDiei_4) and Majority Action's #ClimateChange and #RacialJustice campaigns.

An article from our CEO explaining how accountants can save the world.