The Investment Association (IA) has published a report calling for the realignment of the role of stewardship, charting a roadmap for participants across the investment chain.

The report explored barriers to stewardship activities from investment managers’ points of view, and outlined the developments needed to support long-term value creation and deliver positive outcomes for clients.

It noted that while stewardship sat at the centre of a well-functioning investment landscape, the stewardship framework in the UK had faced scrutiny in recent years over its impact on economic growth and international competitiveness.

Concerns cited included how it delivers for both end-savers and companies, the reporting burden, and the perceived impact on the attractiveness of UK listings.

To realign practices across the investment ecosystem and empower stakeholders to act as partners in the next phase of stewardship, the IA set out a series of recommendations.

These recommendations sought to address several challenges, including the realistic assessment of what stewardship can achieve, the integration of stewardship into the investment process, and the promotion of the full range of mechanisms for stewardship.

The IA recommended that stewardship should be embedded into mandates and relationships between investment managers and asset owners to set realistic expectations about what stewardship can deliver.

It also called for transparency with clients about the potential impacts of specific investment objectives, the encouragement of clients to state the type of stewardship that aligned with their investment objectives, and shifting stewardship oversight towards assessing outcomes linked to value creation.

Furthermore, the IA recommended the enhancement of stewardship reporting, the provision of fund level transparency at the pre-appointment stage on how stewardship supports the fund’s investment strategy, and the promotion of industry consistency by sharing best practices.

The reframing of regulation and reporting to focus on delivering stewardship outcomes rather than activities was also recommended, alongside increasing investment consultant transparency and improved articulation of the costs and value of stewardship reporting.

“The investment industry has reached an inflection point regarding the role and value of stewardship,” said IA director, stewardship, risk & tax, Andrew Ninian.

“The report highlights a number of challenges that the investment management industry is experiencing when conducting stewardship on behalf of clients.

“The practical recommendations identified in our report empower stakeholders - including policymakers, asset owners, and investment managers - to act as coalition partners in stewardship’s next phase, one in which clarity of purpose prevails over box-ticking and stewardship is positioned as a critical tool for informing the investment process and driving long-term value.

“Looking ahead, fostering effective stewardship practices and outcomes requires all stakeholders across the investment chain to work collaboratively, aligned with the common goal of sustainable value creation for the end-saver.”

IA Stewardship Committee chair and Aegon Asset Management head of UK responsible investment, Miranda Beacham, added: “It has been a valuable opportunity to engage with like minded peers across the industry on the topic of stewardship and to collaborate on a paper that will help shape future discussions among stakeholders.

“Our aim is to initiate a dialogue that can continue over the coming years, strengthening stewardship practices and supporting the development of a resilient and thriving UK economy.”

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