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2018 STEP Change Report: FTSE Russell Stewardship, Transition and Engagement Program for Change

Executive summary

Growing numbers of asset owners, asset managers and others involved in the investment chain now routinely consider stewardship and sustainability themes as core investment priorities. Around the world, they are taking action to integrate sustainability themes such as climate change into central aspects of their investments and operations.

Especially since the financial crisis, there has been widespread concern about shorttermism in institutional asset management, with investment managers often trying to maximize returns over each quarter, but potentially generating sub-optimal longterm returns as a result.

There is a growing view that insights from environmental, social and governance (ESG) data, the structuring of investment mandates to incentivize a longer-term performance outcome, and strong investor stewardship and engagement with the management of investee companies will collectively help address this potential market failure, and potentially contribute to better long-term risk-adjusted returns.

FTSE Russell has a long-standing commitment to sustainable investment and has been at the forefront of this trend for nearly two decades, since the launch of the FTSE4Good Index Series in 2001. Now the momentum towards sustainability is building amongst investors globally.

For example, Larry Fink, the CEO of Blackrock, the world’s largest asset owner, said in his open letter1 this year to corporate chief executives: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Read the 2018 STEP Change report to understand how we work with corporates, NGOs and investors to improve disclosure and foster transparency for the long-term benefit of the market and ultimately the societies we all operate within.

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1 https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-le...