Systemic Stewardship: The financially material imperative

This report explores the evolution and practical implementation of systemic stewardship – focusing on systemic risks such as climate change, inequality, and governance failures – for highly diversified owners that are exposed to systemic risks, such as pension funds and some asset managers.

It provides a comprehensive and robust evidence review, regulatory analysis, and a range of strategic recommendations for combining system-wide stewardship with investment approaches, with a particular focus on how to navigate the particularities of the UK, EU, and US regulatory environments.

Key findings and recommendations

• Universal ownership in practice: The report highlights how highly diversified investors are exposed to risks that affect the entire market, not just individual assets. This creates a financial and fiduciary imperative to safeguard the viability of global financial, environmental, and societal systems.
• Systemic risk integration: Investors are urged to move beyond traditional risk management and incorporate systemic risks into their decision-making, using tools such as scenario analysis, systems mapping, and policy advocacy.
  
  
• Navigating regulatory divergence: The report provides guidance for investors on tailoring stewardship strategies to local legal and political realities, noting that UK investors in particular can leverage the UK’s generally enabling regulatory framework to shape global norms and collaborative frameworks.
  
  
• Building organisational capability: Recommendations include formalising business partnerships between stewardship and investment teams, integrating stewardship into investment processes, and deploying AI and digital tools to enhance stewardship capacity and reporting.
  
  
• Strategic roadmap: The report outlines a phased implementation plan for investors, from preparing narratives for the 2026 Stewardship Code and launching regulatory intelligence dashboards, to leading advocacy alliances and developing frameworks for emerging risks over the next five years.

The report underscores the responsibility of asset owners to use all available levers, including stewardship, to drive long-term value creation at both the portfolio and market level. In a rapidly evolving regulatory and market landscape, leadership and decisive action are essential. Waiting for certainty may pose the greatest risk of all.