Regulators, clients and markets increasingly expect stewardship to show meaningful progress, not just frequent engagement. In the UK, the evolving Stewardship Code makes this shift explicit. It reflects a broader transition in sustainable investing towards real-world outcomes, financial materiality and the assets we actually hold.

From activity to outcomes

The starting point is simple: engagement is a means, not an end. In 2025, we undertook a large number of engagements across public markets and voted on thousands of resolutions. But those numbers are not the point. What matters is how engagement is conducted, what objectives are set, and whether companies respond.

Our experience shows that progress is rarely immediate. Engagement typically follows a multi-year path – from understanding an issue, to setting expectations, to implementation and ultimately to delivery. At any point in time, most engagements remain in motion rather than reaching completion.

This isn’t a weakness of stewardship. It’s a reflection of how change happens within companies. Complex issues – whether climate transition, cyber resilience or supply chains – require sustained dialogue, clear expectations and consistent follow-through.

Importantly, the most effective engagements are grounded in financial materiality, have clear objectives, define the change expected, and are backed by escalation where needed.

Without these elements, engagement risks becoming a conversation without consequence.

A holdings-centred approach

A more grounded approach to stewardship starts from holdings, not themes. Broad topics and external frameworks can be useful, but they risk detaching stewardship from the underlying investment. Engagement should begin with a simple question: what matters for this company, in this sector, in this region, and why?

This requires a deep understanding of business models, sector dynamics and capital allocation. The same sustainability issue won’t carry the same weight across every company. Sustainability issues are not universally material, nor are they linear in their impact. Climate risk may be central for one issuer, while data privacy, water use or labour standards may be more pressing for another. A holdings-led approach brings those nuances to the fore.

Using all available levers

Effective stewardship isn’t limited to dialogue. Engagement, voting and capital allocation work best together by reinforcing expectations and driving accountability.

Dialogue allows us to test assumptions, challenge strategies and assess how companies are responding to material risks. In credit markets, bondholders may not have voting rights, but they can still influence issuers through dialogue, capital allocation and ongoing risk assessment.

Voting can support companies that meet expectations and hold boards and management to account when they don’t. Capital allocation, across equity and debt, determines where funding is directed. When engagement is grounded in clear objectives, these levers reinforce each other. Without that clarity, their impact is diluted.

Escalation also matters. When companies don’t respond, or when progress stalls, investors need to be willing to act. It may not lead to immediate change, but it sharpens accountability and sends a clear signal.

Testing credibility, not just ambition

Ambition is easy; delivery is harder. Engagement adds value by testing whether plans are credible and backed by capital allocation and operational change. Climate discussions, for example, have moved beyond long-term emissions targets to near-term delivery, physical risk and resilience. Companies are being challenged not just on what they aim to achieve, but on how they will adapt and fund that change.

When companies understand the financial implications, conversations become more focused. In our experience, this is when progress is most likely.

Why this matters for investors

For investors, the question is no longer whether stewardship activity is taking place. It’s whether that activity is targeted at the issues most likely to affect long-term value, and whether it’s strong enough to change the investment case when companies fail to respond.

Investors should look beyond headline engagement numbers and ask harder questions: 

If the answer is no, investors may be taking risks they can’t see clearly – from governance failures and weak transition plans to cyber, supply chain or labour issues.

The practical implication is clear: stewardship should be treated as part of investment risk management, not as a reporting exercise. A grounded approach to sustainability focuses on the real drivers of value, rather than abstract scores or activity metrics.

This is where having an active manager matters. A passive fund can provide efficient market exposure, but it still owns real companies with real risks. An active manager can add a stewardship overlay across both active and passive mandates. That means identifying financially material issues, engaging with companies on areas to improve, and feeding the outcomes back into voting, risk assessment, capital allocation and portfolio decisions.

In that context, stewardship isn’t a separate sustainability exercise. It’s a way of making passive exposure more informed and active exposure more accountable.

Final thoughts…

The stewardship ecosystem is moving away from counting interactions and towards demonstrating outcomes. For investors, that makes the choice of manager more important, not less.

Effective stewardship must be grounded in financial materiality, rooted in the realities of the companies we invest in, and focused on achieving measurable change over time.

Ultimately, stewardship isn’t about how much we say or the numbers we cite. It’s about what changes as a result, and whether investors have a manager with the discipline and tools to pursue those outcomes.