What is stewardship and engagement? Stewardship is a process through which those representing owners carry out their duties in the best interests of the owners. The purpose of stewardship is to protect or enhance the value of assets over time to ensure that there is no negative impact through neglect or mismanagement.

There are three pillars to stewardship, monitoring, voting, and engagement. Monitoring involves following and observing companies in investor portfolios. This involves a number of activities such as analyzing company announcements, financial reports, and management commentaries, as well as visiting companies and assessing third party research on the issuers.

Voting refers to taking action at the investee company's general meeting, supporting or proposing shareholder resolutions.

Engagement is a dialogue with the management and boards of investee companies about specific activities of the business in order to preserve or enhance value.

To provide some context, this illustration features the fund manager in the middle, and the portfolio companies on the right, and the fund manager's clients, that's the asset owners on the left. Now, these may include various institutional investors such as mutual funds and pension funds but could also include individual investors as well. It's best to think about stewardship as a process through which the fund manager monitors, votes, and engages with the investee companies to provide the best possible result for the fund manager's clients, those are the asset owners, on whose behalf the fund manager makes investment decisions and fulfills stewardship duties. It's also worth noting that the asset management company staff involved in stewardship are the fund managers themselves, their teams of analysts, as well as dedicated stewardship and engagement teams to support those activities on a firm-wide basis. The asset managers regularly report to their clients on the stewardship efforts and the outcomes of those activities.