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Six Steps to Improve Your Stewardship Reporting

Effective stewardship reporting is important for stakeholders to understand how you as an investor interact and influence your investees and broader sphere of influence. In this blog, we outline six areas for improved reporting and demonstration of investor stewardship.

1. Ensure your engagement tracking is up-to-date

Many investors struggle to systematically record and capture engagement data, which is hurting their reporting and transparency efforts. Therefore, better systems are needed to adequately capture and report both basic statistics and more detailed insights.

You will probably sense if your system is adequate or not. Just as in any other area of your business, modernising engagement management can help optimise and effectivise the workflow; in this instance, especially from a data management and reporting perspective.

2. Don’t forget your broader sphere of influence

Quality stewardship is not just about the oversight of existing assets, but also how you use your role and position to influence stakeholders and the broader market. Here are three examples of how this is shaping investor practices:

  • The UK Stewardship Code states that investors should explain how they have worked with other stakeholders to promote the continued improvement of the functioning of financial markets, for which reporting should explain their organisation’s role, contribution, and an assessment of their effectiveness.

  • GFANZ recommends that investors disclose a summary of their engagement activities with governments and the public sector, including topics and audiences,

  • The Investment Consultants Sustainability Working Group (ICSWG) suggests in their engagement reporting guide that asset managers should report the approximate number of different entities they have engaged with.

Via Esgaia, one way to capture this is by labeling groups of stakeholders together and then link activities (and engagements) as applicable. Here are some ideas of relevant groups, aside from companies and assets:

  • Clients/beneficiaries,

  • Industry stakeholders,

  • Civil society (e.g. NGOs, Academia, Trade associations),

  • Public sector (e.g. policy consultations, governments)

3. Separate engagement for information vs change

To ensure quality and honesty in stewardship efforts, investors should try to separate what constitutes more general information-gathering and monitoring vs engagements with articulated goals and objectives. This should then be accounted for in investors' disclosures.

Via Esgaia, you can easily enforce such tracking either through implementing a review process on created engagements and activities, and or by highlighting a tiered structure to users (using custom fields) such that e.g. general monitoring is linked on the company level, and not to specific engagements.

// Here's a short video of how Esgaia can help streamline your reporting:

4. Use engagement sequences in data capture

The engagement toolbox consists of a wide range of activities, all differently placed on the resource intensity spectrum. To enable good oversight and detailed case narratives, while capturing new issues as they emerge, you should preferably view engagements as sequences of interactions dealing with the same issue, rather than as standalone interactions.

Via Esgaia, you have the flexibility to decide for yourself, but the system is built to cater to the aforementioned approach. By using a tiered structure of Company/entity > Engagements > Activities, you would benefit from the clarity of separate engagement profiles with linked activities. For more information, read our dedicated blog on the subject: Aligning Your Process According to Engagement Sequences

5. Case studies should reflect your best engagement stories

Engagement case studies are required in most disclosure regimes, for example in the UK Stewardship code. It offers an excellent way to bring your processes and statistics to life, helping exemplify your approach, performed activities, and resulting outcomes.

Assuming case studies reflect your best efforts, they should be well-crafted, addressing e.g. the objectives, rationale, and methods of the engagement. Here’s a template you might find useful:

  • Snapshot:

    • Entity name (if public, preferably corroborate with counterparty for accuracy)

    • Issue topic

    • Engagement period

    • Engagement status (ongoing vs concluded)

    • SDG contribution

  • Narrative:

    • Background

    • Objective(s)

    • Activities

    • Achievement(s)

    • Outcomes & value creation

    • Next steps (if applicable)

6. And lastly, focus on quality not quantity

Investment stewardship is not a numbers game, it never was. Qualitative engagement is what matters, which requires significant judgement and activity, often over long time periods. This goes for your reporting as well, disclosures should reflect honest and realistic claims of efforts and activity levels. And if you get evaluated or incentivised to increase quantity at the risk of hurting quality, then push back.

If you want more guidance in this area, take a look at these blogs:

And of course the UK FRC’s review of effective stewardship reporting; part 5 in the report includes a guide with additional coverage of engagement prioritisation, escalation, engagement outcomes, and collaboration.

//The Esgaia team


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