Evolving regulatory requirements and the pressure to deliver sustained returns have led investors to increasingly monitor extra-financial factors alongside financial performance. Now environmental, social and governance (ESG) factors are integrated into the investment decision-making process, to identify opportunities as well as manage risk.
Moreover, for investors, stewardship is no longer just about voting. It means monitoring and engaging with companies on strategy, risk management, capital structure and corporate governance.
For companies, the challenge is to understand how each investor exercises their rights and responsibilities.
Boards and management teams are now under constant pressure to demonstrate how their strategic decisions aim to create value for stakeholders. Failure to effectively communicate the long-term impact of those decisions makes a company more vulnerable to threats posed by investors, competitors, and other market participants.