Environmental and social-related stewardship could be more successful if shareholder advocacy focused on real-world impacts, as opposed to pledges and reports. A new paper published by NYU Stern Center for Business and Human Rights noted that “a company tossing a bone to [shareholder] activists by agreeing to a tepid report, or a non-binding pledge should not be confused with a company agreeing to meaningful operational change”. Investors should instead capitalise on broader social currents, compounding pressure from the media and civil society to translate shifting sentiment into meaningful corporate action, the report suggested. In addition, investors should look to support new sustainability laws and engage with policymakers and companies to fill the gaps. Large financial institutions must continue to engage quietly, NYU Stern said – ideally in powerful coalitions that target broad economic sectors – and also closely scrutinise company director-based strategies on their ESG-related credentials and ambition. Meanwhile, it’s important that asset managers build their ESG-related funds around a specific stewardship strategy. “Stewardship, as currently practiced, rarely changes business models,” said Michael Goldhaber, report author and Senior Research Scholar at NYU Stern. “But shareholder advocates can succeed when they work in tandem with other change agents to shape corporate behaviour over time. Their most valuable role is to translate shifting social sentiment into real-world change.”
