The pivotal role of stewardship in creating lasting value

We believe that stewardship is at the heart of long-term financial and sustainable excellence. A stewardship-led investment approach combines responsible investing with the search for competitive long-term returns by uncovering and fostering companies that are what we call “good stewards”. These can be found in the most unexpected places as our two case studies demonstrate.

We define stewardship as how companies balance the interests of all stakeholders — such as customers, employees, communities, supply chains and the environment — in their pursuit of profits and how they incorporate material ESG risks and opportunities into their corporate strategy. In our view, stewardship can be assessed by how successfully company boards and managers balance people, the planet and profits when building long-term advantage by:

• Investing in People, including employees, suppliers, customers and the community at large, leading to lower employee turnover, greater loyalty, a stronger culture and greater diversity;
• Respecting the Planet and building resilience by shrinking their environmental footprint, taking steps to make better use of finite resources and engaging proactively on climate change; and
• Boosting Profit by being disciplined capital allocators — balancing shareholder returns today with investment in innovation, business and people for tomorrow.

Clearly, even stewardship leaders are still on a journey, and at Wellington, in our products that consider stewardship, we seek to accelerate progress through robust engagement. Engagement enables us to hold management teams and boards accountable for their actions and to support or influence decisions that can maximise companies’ long-term value. Importantly, developing strong relationships with companies gives us the opportunity to champion and support long-termism as well as challenge insular thinking. 

Engagement is even more critical when companies operate in higher-risk areas, as we illustrate below with a discussion on supply-chain issues at a leading tyre manufacturer and environmental sustainability at a global producer of household and consumer goods.