This chapter analyses how institutional investors engage with investee companies, the main forms of engagement, and how its effectiveness can be assessed. It examines information asymmetries between asset owners and asset managers, and how asset owners may seek greater influence over stewardship through tools such as pass-through voting and twin-track models. The chapter reviews collaborative investor initiatives on sustainability and related antitrust concerns, compares engagement policies and voting practices across leading investors, considers how companies respond and disclose their own engagement policies, and explores how institutional investors’ expanding voting rights may shape market standards.
Institutional Investor Engagement and Stewardship
Abstract
There are critical issues for policymakers and financial sector regulators to examine when seeking to develop a regulatory framework conducive to effective engagement. This includes a consideration of the forms of investor engagement, engagement policies developed by institutional investors and institutional mechanisms to facilitate engagement.
Institutional investors have adopted different engagement practices to suit their preferences and those of their clients. For example, they may decide to opt for either a “topic‑based” or a “corporate‑based” engagement style.
“Corporate‑based” engagement focusses on influencing practices on specific issues at an investee company. It involves institutional investors tailoring engagement efforts to address company‑specific risks or opportunities. Institutional investors may analyse individual companies’ financial performance, sustainability practices or corporate governance structures to identify the best approach to conduct engagement activities. A “corporate‑based” approach tends to be more appealing to institutional investors who analyse investee companies’ fundamentals in their decision‑making process because they are well‑positioned to assess where the business or its corporate governance could be improved (PRI, 2018[12]).
“Topic‑based” engagement involves focussing on thematic issues or topics, such as climate change, across a range of companies. This allows institutional investors to address broader sources of systemic risks or opportunities, contributing to changes at a broader industry level. Notably, a “topic‑based” approach is less costly for index investors who would need to invest resources in researching and analysing the businesses of individual companies in a “corporate‑based” engagement (PRI, 2018[12]).
The key risk of topic-based engagement is that, in addition to not being well-suited for the specific circumstance of a company, the engagement topic may have been chosen to please an index investor’s clients while not necessarily being financially material for the investment portfolio. Moreover, some institutional investors may perform topic-based engagement to signal they are good stewards without the necessary expertise or investing sufficient resources to provide guidance that is effectively helpful for them or controlling shareholders.
An evolving approach some institutional investors are adopting is the concept of “macro stewardship” (also known as “systemic stewardship”), which focusses on addressing systemic issues such as climate change that can affect the stability and long-term performance of financial markets as a whole (Aviva Investors, 2022[13]). While traditional stewardship approaches involve bilateral engagement with individual investee companies, macro stewardship advocates institutional investors engaging with governments and policymakers to correct market failures related to sustainability issues (Financial Times, 2023[10]).
Institutional investors may decide to advance their engagement individually, by engaging directly with investee companies, or collaboratively, by interacting with other investors. In some cases, engagements can also be a mix of individual and collaborative forms, where one or two institutional investors take the lead when engaging with the company. In recent years, investor coalitions with a particular focus on environmental issues have arisen (Section 2.2).
Engagement actions can be carried out privately, involving direct interactions with the investee companies, for example, through letters or meetings with members of the board of directors or management. This approach enables institutional investors to begin with private engagement and escalate to public actions, like issuing statements or submitting proposals at shareholder meetings, if private dialogue is unsuccessful.
Institutional investors frequently engage with investee companies in private meetings although the timing and content of which are often undisclosed. Examination of the effect of such meetings between an active asset manager and its investee companies showed that private engagement meetings increased trading and were associated with profitable decisions by the manager (Becht, Franks and Wagner, 2021[14]).
Whereas measuring private engagement actions is challenging, considerably more information is available on public engagement. Notably, shareholder resolutions are often viewed as an escalatory tool, typically used when private engagement has not yielded the desired results for institutional investors. Figure 2.1 takes account of the 2024 annual shareholder meeting details of large listed companies (constituents of the MSCI World Index) in selected jurisdictions. It shows the origin of the proposals (i.e. introduced by management or shareholders) and their outcomes, such as approval, failure or absence of vote.
Overall, management‑initiated proposals are more frequent and tend to be approved, whereas shareholder‑initiated proposals are comparatively rare and more often either fail or are not voted on. This pattern is consistent across the 13 selected jurisdictions, although the regulatory requirements within each jurisdiction may differ. For instance, in Canada’s 2024 annual meetings, almost 170 management proposals were approved and one failed, against six approved shareholder proposal and 89 failed proposals (Figure 2.1).
Regarding the average number of management proposals per company, this number is highest in Sweden (28 proposals) and in Germany (25 proposals) and averages 2 proposals in Canada and 3 proposals in the United States and Japan. In the case of Germany, the number of proposals takes account of the ratification by the shareholders of each supervisory board member’s actions during the past fiscal year, which may explain the comparatively high average. Meanwhile, Canada, Norway and the United States are the only countries where shareholder proposals average more than one per company, with Australia and Sweden lower at 0.4 proposals, and negligible numbers in other analysed markets.
However, using annual shareholder meetings as a proxy for measuring the success of engagement with investee companies may not provide a comprehensive view of engagement outcomes. Management-led resolutions at these meetings typically focus on routine corporate governance matters, such as director re‑elections and executive compensation, which usually receive majority shareholder support. In some jurisdictions, regulatory requirements or corporate structures, such as two‑tiered board structures, may increase the number of management resolutions, particularly those related to board appointments. Furthermore, filing shareholder resolutions may be relatively straightforward in some jurisdictions, leading to a higher number of proposals during the proxy season, while other jurisdictions impose higher thresholds that limit their inclusion on company ballots. Likewise, where shareholder decisions are not binding, there may not be enough incentives for shareholders to make the proposals in the first place.
Note: The figure displays the available annual shareholder meeting details of 1 017 large listed companies (companies that are MSCI World Index constituents as of June 2025) in Australia (41 covered companies out of 48 companies in the index), Belgium (10 out of 10), Canada (72 out of 74), Denmark (7 out of 13), France (54 out of 57) Germany (50 out of 60), Japan (91 out of 182), the Netherlands (24 out of 26), Norway (10 out of 11), Sweden (28 out of 41), Switzerland (34 out of 40) the United Kingdom (65 out of 79) and the United States (531 out of 562). The markets where coverage was below 50% of companies or fewer than 5 companies in the MSCI World Index are not displayed. The darker colour shading of each column reflects the more frequent proposals by management or shareholders.
Source: FactSet; MSCI (2025[15]), MSCI Constituents, https://www-cdn.msci.com/web/msci/index-tools/constituents; OECD calculations.
Within the approved management proposals during the annual shareholder meeting, executive compensation issues represent 26% of the total, followed by the approval of discharge of the board and senior management (20%), auditor-related issues (18%), and capital stock issues (18%) (Figure 2.2). From the shareholders’ side, 79% of the 48 proposals that were approved involved corporate governance issues, followed by 6% on other board-related issues, and 4% on environmental and social issues each. When analysing the 776 shareholder proposals that either failed or were not voted on, 32% and 20% of them focussed on social and environmental issues, respectively.
Source: FactSet; MSCI (2025[15]), MSCI Constituents, https://www-cdn.msci.com/web/msci/index-tools/constituents; OECD calculations.
2.1.1. Clients’ say on stewardship
Asset owners can enlist asset managers to conduct their investment activities. In turn, asset managers are responsible for delivering returns, ensuring they act as stewards of investee companies, and aligning their investment decisions with the asset owners’ interests and objectives, as outlined in their mandates and while upholding their fiduciary duties (Section 3.4). Asset managers are thus primarily responsible for executing stewardship, while asset owners are tasked with specifying how their assets should be managed. However, this separation of roles may not always be evident, particularly when large asset owners establish their own in‑house asset management divisions or when an asset manager fully or partially outsources stewardship responsibilities (The Investment Association, 2018[16]).
There can be information asymmetry between asset owners and asset managers in relation to the delivery of stewardship services. One way to reduce this asymmetry is when asset managers publish engagement and voting policies that provide an indication of how they will approach common corporate governance and sustainability-related issues at investee companies (Section 2.3). Another way to reduce asymmetry is for asset managers to report detailed outcomes of the engagements they perform publicly or privately to their clients. A third way to reduce the asymmetry is to allow “pass‑through voting”.
Pass-through voting is a mechanism that allows asset owners, and in some circumstances retail investors, to have a say in how the shares they own in listed companies are voted even when those shares are held by their asset managers (Gurrieri and Callan, 2024[17]). Pass-through voting gives asset owners the ability to instruct their asset managers how to vote the underlying shares including in pooled funds, in a similar way as asset owners already had the ability to determine voting decisions in segregated mandates.
Although the specifics can vary, typically pass-through voting in the context of asset owners and asset managers may involve providing the former with a range of voting polices that are then applied or asset owners may be able to vote directly. Based on the asset owners’ preferences, the asset manager then executes votes based on these instructions. Systems have been developed to facilitate this voting process electronically, so that asset owners can vote when it suits them or set preferences to vote for or against certain proposal types. The asset owner’s vote can guide the asset manager’s decision, either applied proportionally or as a non-binding poll to gauge investor preferences (Gurrieri and Callan, 2024[17]).
While pass-through voting may empower sophisticated asset owners, less resourced asset owners may lack the expertise to engage with complex corporate governance and sustainability-related issues when exercising voting rights. When voting is fragmented among asset owners using pass-through voting, cohesive voting strategies may weaken, potentially reducing the influence and effectiveness of the voting bloc compared to centralised decision making by the asset manager. This fragmentation can also dilute an asset manager’s ability to present a unified voice in engagements with investee companies (Stewart, 2023[18]), possibly weakening their influence over corporate behaviour and reducing their ability to hold management to account through voting decisions as a disciplining mechanism.
Some of the largest index asset managers are introducing “twin-track stewardship” services (Responsible Investor, 2024[19]). In February 2024, BlackRock announced a new climate‑focussed stewardship option for clients who have decarbonisation objectives (BlackRock, 2024[20]). Similarly, State Street Global Advisers (SSGA), now State Street Investment Management (SSIM), launched a new sustainability‑focussed stewardship offering for clients who want to drive sustainability outcomes (SSGA, 2024[21]).
Institutional investors remain the largest group of investors globally, holding 47% of total equity at the end of 2024. However, the public sector also plays a significant role, accounting for 10% of total equity holdings (OECD, 2025[22]). The public sector broadly comprises governments as ultimate owners at both national and local levels, public pension funds regulated under public law and sovereign wealth funds (SWFs) (OECD, 2025[22]). Although this report focusses on institutional investors and their stewardship practices, the public sector is included in the analysis below given its importance as an owner and an investor in public equity and debt markets. The report primarily focusses on listed equity stewardship and, in some cases, public debt investments. While public sector entities may also invest and exercise stewardship in other asset classes, these are outside the scope of the analysis.
There is a degree of commonality in how public sector investors exercise stewardship, depending on their approach to public equity and debt investment – similar to traditional institutional investors (Section 2.1.1). However, there can be nuances in how different public sector entities may exercise stewardship as investors reflecting their specific mandates and responsibilities (Box 2.1).
Governments as investors
National and local governments can be investors in public equity markets. While there are some similarities in how they exercise stewardship as described in Section 2.1.1, important differences exist. Government ownership structures may take various forms, including direct ownership through government institutions, state‑owned holding companies or indirectly through SWFs, public pension reserve funds or other types of investment vehicles (OECD, 2024[23]).
The rationale for government investment in public equity may also differ from that of traditional institutional investors. In addition to seeking long-term value creation, governments may pursue broader public policy goals – for example, maintaining national control over industries key for national security or supporting the transition to a low-carbon economy (OECD, 2024[23]).
Public pension reserve funds
Public pension reserve funds (PPRFs) are reserves or buffers to support otherwise pay-as-you-go financed public pension systems (OECD, 2022[24]). Historically, stewardship was considered by PPRFs only where it affected portfolio risks. However, stewardship has now become a central part of how PPRFs manage listed equity investments, reflecting the view that it enhances both value creation and risk management.
In addition to exercising stewardship as described in Section 2.1.1, PPRFs may collaborate through investor networks to promote responsible corporate behaviour and align portfolios with long-term sustainability goals.
Sovereign wealth funds
SWFs are pools of assets owned and managed directly or indirectly by governments to achieve national objectives. They are typically financed by foreign exchange reserves, proceeds from the sale of natural resources such as oil or general tax and other revenues. SWFs often pursue multiple and sometimes overlapping goals, such as diversifying national assets, enhancing returns on reserves, funding future pensions, saving for future generations, stabilising prices, supporting industrialisation and advancing strategic interests (OECD, 2008[25]).
While typically focussed on capital preservation and financial returns, some SWFs have gradually begun to incorporate environmental and social considerations into their strategies. In public equity holdings, they may exercise stewardship as more traditional investors. As government-owned investors, their mandates – set by the state shareholders – determines how stewardship is undertaken.
There are various market initiatives and alliances that support investor engagement on sustainability, ranging from the codes described in Section 3.3 to investor alliances below. Some of these predominantly industry‑led private initiatives were established over two decades ago and others have arisen more recently, all with a focus on improving institutional investors’ action to mitigate the impacts of climate change.
Climate Action 100+ is an investor‑led initiative that was launched in 2017 and aims to “ensure the world’s largest corporate GHG emitters take necessary action on climate change.” It is the largest investor engagement initiative on climate change, with approximately 600 global investors across over 30 markets. The focus is shareholder engagement with specific companies that are key to driving the global net‑zero emissions transition, including 168 focus companies selected according to their GHG emissions for engagement. A key focus of the initiative is on investment stewardship by investors who hold shares in those companies, which includes direct engagement with public companies that aims to “achieve corporate practice consistent with long‑term value protection and creation” (Climate Action 100+, 2024[26]).
As part of the Phase 2 of the initiative, Climate Action 100+ has introduced thematic engagements supported by co-ordinated networks. In this context, in 2024 and 2025, the PRI and the Asia Investor Group on Climate Change (AIGCC) are collaborating to focus on engagement with state-owned enterprises in Asia. In the United States, CERES will support climate accounting engagements with oil and gas companies, work with regulators and standard setters, and lead Just Transition efforts in North America’s electric power and transportation sectors, focussing on net-zero science‑based targets. In Europe, the Institutional Investors Group on Climate Change (IIGCC) will focus on climate accounting and climate lobbying thematic engagements with European companies. Other thematic issues, which will be a focus for engagement across geographies include methane measurement, reporting and abatement, executive remuneration, board competency and capital allocation (Climate Action 100+, 2025[27]).
However, the shift to the Phase 2 may have resulted – among other possible reasons – in some large asset managers leaving or scaling back their participation in the initiative, citing concerns that this impedes an “independent approach to proxy voting and portfolio company engagement” (Financial Times, 2024[28]). In response, Climate Action 100+ clarified that the transition from Phase 1 to Phase 2 remains consistent in its core purpose: ensuring the world’s largest corporate greenhouse gas emitters take necessary climate action. Climate Action 100+ also stated that all participating investors act independently, making their own investment and voting decisions based on their best interests (Climate Action 100+, 2024[29]).
The Institutional Investors Group on Climate Change (IIGCC) was established in 2001 with the initial aim of providing a forum for collaboration between pension funds and asset managers on climate change issues and brings the investment community together to work towards a net zero and climate resilient future. Its membership comprises asset owners and managers, including many large global and European institutional investors (over 400 members from 27 countries) (IIGCC, 2024[30]). The IIGCC has developed several key initiatives and resources. For instance, the Net Zero Investment Framework (NZIF), which was originally released in 2021 and updated with NZIF 2.0, is used as a guide by investors that have set voluntary net‑zero commitments (IIGCC, 2024[31]). The framework aims to assist them with their methodology to set targets and construct net‑zero strategies and transition plans (IIGCC, 2023[32]). In addition, the Net Zero Engagement Initiative was subsequently launched in 2023 by the IIGCC. It was established to concentrate on companies beyond the focus of the Climate Action 100+. The aim of the initiative is to assist investors to align more of their portfolio with the goals of the Paris Agreement (IIGCC, 2023[33]).
In 2021, the UN-convened Glasgow Financial Alliance for Net Zero (GFANZ) was launched as a coalition of eight financial alliances and initiatives (representing over 675 financial institutions and firms from around 50 countries), and non‑member private and public sector organisations. GFANZ was committed to accelerating the decarbonisation of the economy by developing tools and methodologies to assist financial institutions to implement their net‑zero commitments (GFANZ, 2024[34]). In 2025, it was announced GFANZ would “transition to an Independent Principals Group, led by CEOs and leaders from financial institutions acting to address barriers facing in mobilising capital for the transition around the word” (GFANZ, 2025[35]).
The growing emphasis on sustainability‑related matters in stewardship has increased the strategic importance of the relationship between asset owners and asset managers, particularly for those who seek to strengthen climate risk management in their investment portfolios (UN-Convened Net-Zero Asset Owner Alliance, 2023[36]). In this context, the United Nations (UN)-Convened Net‑Zero Asset Owner Alliance, whose membership encompasses 89 asset owners with total assets under management of USD 9.5 trillion, has recently set four key principles to create a foundation for asset owner expectations of asset managers in terms of climate‑related engagement. These principles call for an enhanced dialogue between owners and managers aiming at fostering confidence, transparency and authenticity, focussing on “common stewardship expectations and on the most value-added outputs of asset managers’ engagement programs”.
2.2.1. Competition and antitrust considerations
While collaboration between institutional investors on sustainability issues at investee companies may be important to change or influence companies’ strategies where it is in line with enhancing and/or preserving the value of investments, competition law concerns should be considered. A potential conflict between initiatives to meet sustainability goals and antitrust rules may arise. While sustainability issues should not be used to engage in anticompetitive conduct, competition agencies would not be advised to impede any private activity aimed at reducing or internalising negative externalities (OECD, 2020[37]). As such, the frontier between co‑ordinating engagement to improve a company’s sustainability-related strategy and acting in concert in the context of competition and takeover rules is still being explored and typically varies depending on the jurisdiction and context.
As outlined in work conducted by the OECD, given the importance of sustainability in jurisdictions’ agendas globally, competition authorities may consider adjusting their approach and analytical tools when considering competition assessments in relation to sustainability benefits. For instance, competition authorities may integrate economic and non‑economic environmental effects into their existing framework for competition assessments. OECD research concludes that “[i]n their assessment of conduct and transactions with an impact on environmental protection, competition authorities will have to consider carefully the companies’ economic incentives, as well as supply‑side and demand‑side markets failures, such as coordination problems, first-mover disadvantage or consumer behavioural biases, which, if ignored, may lead to non-optimal outcomes for achieving well‑functioning markets” (OECD, 2021[38]). Further, the same paper notes that competition authorities face a balancing act between anti‑competitive risks and beneficial green co‑operation initiatives.
An example is the European Commission issuing guidelines in 2023 that aim to provide legal certainty when assessing whether horizontal agreements meet European Union (EU) competition rules (EC, 2023[39]). Such an assessment must be balanced with encouraging competition in ways that are economically desirable. Sustainable development is a priority focus for the EU as part of the “Green Deal”. Accordingly, the guidance includes a chapter that sets out general guidance on the competitive assessment of the common types of agreements between competitors that pursue sustainability objectives.
More broadly, the EU Competition Law aims to “ensure that undertakings do not use horizontal cooperation agreements to prevent, restrict or distort competition in the internal market to the ultimate detriment of consumers”. The assessment involves a two‑step process: (i) whether an agreement that is capable of affecting trade between EU Member States, has an anti-competitive object or actual/potential limiting impact on competition; (ii) and if so, whether the advantages offset the disadvantages for competition. In relation to sustainability, it is stated that “[h]orizontal cooperation agreements can lead to substantial economic benefits, including sustainability benefits, in particular where they combine complementary activities, skills or assets”. However, “[a]greements that restrict competition cannot escape…[the anti‑competitive rules]…simply by referring to a sustainability objective”. As such, sustainability agreements are assessed in a similar manner to other agreements from a competition perspective. Still, some of the key factors to qualify under the exemption are articulated, such as efficiency gains and collective benefits, as well as some degree of residual competition remaining (e.g. in relation to price or quality) (EC, 2023[39]).
An example where this issue has been directly addressed is in the Netherlands, where the Authority for Consumers and Markets (ACM) has issued guidance on the application of competition rules to horizontal and vertical sustainability agreements (finalised following the European Commission guidelines). Agreements are prohibited if their object, or their effect, is the prevention, restriction or distortion of competition. Sustainability agreements are defined to be “all agreements that pursue a sustainability objective, irrespective of the form of the cooperation”. Examples include activities that reduce pollution, address climate change and ensure animal welfare. Agreements that restrict competition but also offer benefits that outweigh the negative effects of those agreements may be exempted from the prohibition.
Agreements that aim solely to ensure compliance with legally binding international treaties, agreements or conventions are exempt from the prohibition, both per the ACM guidance and the European Commission guidelines. In addition, ACM’s position is that it will not further investigate an environmental damage agreement if the initial investigation demonstrates that the agreement is needed to achieve the environmental benefits and that the benefits outweigh the potential competitive disadvantages, thus serving the public interest (ACM, 2023[40]).
An example from Asia is the guidelines issued by the Japan Fair Trade Commission (JFTC), which aim to further Japan as a “green society” by “preventing anti-competitive conduct that stifles innovation such as the creation of new technologies, and encouraging the activities of enterprises, etc. toward the realization of a green society by further improving transparency in the application and enforcement of the Antimonopoly Act in relation to the activities of enterprises, etc., and predictability for enterprises”. The basic premise of the guidance is that: (i) activities that do not have any anti-competitive effects and have the purpose of, for instance, reducing GHG emissions by developing innovative technologies are unlikely to cause a problem under the Antimonopoly Act; (ii) activities that have solely anti-competitive effects, even where they nominally aim to contribute to a green society, are a problem under the Antimonopoly Act; and (iii) activities that are anticipated to have both anti‑competitive and pro-competitive effects, require a comprehensive consideration of “both types of effects generated by the activities with the rationality of the activity’s purpose and the adequacy of the means employed for them”, for instance whether there are less restrictive alternatives (JFTC, 2023[41]).
Another relevant example is from a stewardship code in Australia. Collaboration on stewardship is encouraged in the voluntary Australian Asset Owners Stewardship Code aimed at superannuation funds, where collaboration is described as a powerful lever.1 However, this is balanced with: “[c]ollaboration must be conducted within the relevant regulatory requirements, including competition law, the substantial holding principles and takeover provisions of the Corporations Act 2001 and accompanying guidance…Collaboration activities should never include discussion on investment decisions, should not interfere with the market perception of the control of an entity and should ensure that all investors are able to consider and benefit from proposals” (ACSI, 2024[42]). In addition, the Australian Competition and Consumer Commission (ACCC) has a system in place that allows a company that will engage in conduct that may breach competition law to apply for an exemption of compliance with the rules if the conduct is in the public interest (ACCC, 2024[43]).
Similarly, the IIGCC acknowledges this issue and its webpage has a disclaimer that their work is conducted in line with competition laws and acting in concert rules. It emphasises “participants in any initiative will not be asked for and must not disclose or exchange strategic or competitively sensitive information or conduct themselves in any way that could restrict competition between members or their investment companies or result in members or the investment companies acting in concert” (IIGCC, 2024[44]). IIGCC also explain that investment, voting and decision making, including setting strategies, policies and practices, is at the discretion of members and that the “IIGCC does not require or seek collective decision-making or action with respect to acquiring, holding, disposing and/or voting of securities” (IIGCC, 2024[30]). Climate Action 100+ also has similar disclaimers.
OECD analysis of the 100 listed companies with the highest number of green patents found that institutional investors hold the largest equity portion in these highly innovative companies (37% of the shares). A one percentage point higher concentration in highly innovative companies compared to high‑emitting companies demonstrates the potential for institutional investors to engage more effectively with these innovative companies, complementing the work of other initiatives (e.g. Climate Action 100+, which focusses on high‑emitting companies) (OECD, 2025[45]).
Traditionally, institutional investors have engaged with their portfolio companies in areas including strategy, financial performance, risk management, capital allocation and corporate governance. In recent years, institutional investors’ engagement has also integrated sustainability‑related risks and opportunities, such as climate change, natural capital preservation, water management, human rights, human capital and anti‑corruption.
2.3.1. Examples of engagement policies
This section provides examples of engagement policies adopted by some of the largest asset managers and asset owners. It provides an overview of diverse engagement practices alongside varied prioritisation of objectives through different approaches and voting policies. The selection of asset managers and asset owners below aims to cover institutional investors who adopt active and index investment strategies across different jurisdictions (France, Norway, Japan and the United States). In some cases, there is a greater focus on corporate governance issues (the two index asset managers based in the United States), while in the other three cases, the engagement policies include a stronger emphasis on environmental and social matters (Norway’s sovereign wealth fund, the French asset manager and the Japanese pension fund).
BlackRock
BlackRock’s most prominent line of business is to manage funds following an index investment strategy. The BlackRock Investment Stewardship Global Principles cover seven topics, which serve as the basis of its stewardship and engagement (BlackRock, 2025[46]):
1. Board and directors: BlackRock considers engaging with and electing directors one of its primary responsibilities. Hence, BlackRock engages with companies’ boards to assess their governance practices and board composition, focussing on areas such as independent leadership, risk management and ensuring directors have sufficient capacity to meet their responsibilities.
2. Auditors and audit-related issues: BlackRock highlights the importance of audit committee members’ expertise and independence in ensuring the effectiveness of the audit process. BlackRock places significant emphasis on the relevance of financial statements, stressing that they must accurately reflect a company’s financial health. Likewise, the asset manager expects alignment of such statements with the guidance provided by the International Financial Reporting Standards (IFRS) and the International Auditing and Assurance Standards Board (IAASB).
3. Capital structure, mergers, asset sales and other special transactions: BlackRock stresses that voting rights should align with economic exposure, maintaining a one‑share, one‑vote principle. In assessing mergers, asset sales or other special transactions, BlackRock reviews proposed transactions by the board. Such transactions are expected to count on the unanimous support of the board and their previous negotiation at arm’s length. BlackRock advocates for shareholders’ right to freely trade shares without undue restrictions, suggesting shareholder approval for any measures restricting share trading, promoting shareholder autonomy and governance transparency.
4. Executive compensation: BlackRock underscores the importance of aligning executive compensation with company performance, advocating for clear links between pay and operational/financial results. While not taking a definitive position on sustainability criteria in compensation, it stresses the need for transparency and rigour if included. Emphasising long-term incentives and reasonable deferred compensation, BlackRock discourages special bonuses unrelated to performance and urges disclosure on discretionary decisions by compensation committees.
5. Material sustainability-related risks and opportunities: BlackRock expects investee companies to evaluate and manage material sustainability-related risks and opportunities. While BlackRock allows flexibility for companies and their stakeholders to determine the material aspects of their business, BlackRock places particular emphasis on nature and climate‑related financial risks as possible material factors for companies. However, BlackRock’s nuanced approach also acknowledges that nature and climate‑related financial risks may not be material to all companies and allows for this flexibility. BlackRock looks to companies to disclose their approach to managing material climate‑related risk and opportunities in their business models where possible in line with the International Sustainability Standards Board (ISSB) standards IFRS S1 and S2. However, BlackRock’s approach recognises that regional variations in sustainability standards may exist due to market norms and regulations. Furthermore, BlackRock investigates three components of natural capital: land use and deforestation, water and biodiversity. While nature‑related disclosures have been limited, BlackRock flags that market initiatives such as the Task Force on Nature‑Related Financial Disclosures (TNFD) have been a useful guide for nature‑related disclosure.
6. Other corporate governance matters and shareholder protections: BlackRock expects investee companies to publish information on the governance structures in place and the rights of shareholders to influence these structures. The board is responsible for determining the corporate form that is most appropriate given the company’s purpose and business model. As a fiduciary on behalf of its clients, BlackRock generally supports management proposals if the analysis indicates that shareholders’ economic interests are adequately protected. Relevant shareholder proposals are evaluated on a case‑by‑case basis.
7. Shareholder proposals: BlackRock recognises shareholders’ rights to submit proposals on various issues, including governance, capital management and sustainability-related risks. However, legal and regulatory restrictions prevent BlackRock from submitting proposals, though the asset manager may vote on those submitted by others. Each proposal is assessed on its merits, with a focus on long-term financial value creation. BlackRock supports proposals that enhance transparency on material risks but opposes those that overreach into business decisions or impose undue constraints on management. BlackRock may also vote against directors if the board inadequately addresses key risks. Supporting a proposal does not imply full endorsement of the proponent’s reasoning. In some cases, BlackRock may vote in favour to encourage progress on material risks aligned with clients’ long-term interests.
BlackRock publishes voting guidelines for each region and they are not intended to be exhaustive. As such, the guidelines do not indicate how the asset manager will vote in every instance. Instead, they reflect the general views about corporate governance issues and provide insight into how they typically approach issues commonly arising on corporate ballots. Every year, BlackRock publishes an investment stewardship report with information on engagement and voting outcomes (BlackRock, 2025[47]).
Vanguard
The portfolio construction process of Vanguard-advised funds is mainly index based. Vanguard does not aim to impose strategies for investee companies, submit shareholder proposals or nominate board members. Instead, Vanguard uses engagement as an opportunity to further understand and share perspectives on companies’ corporate governance practices (Vanguard, 2024[48]). For Vanguard’s active funds, engagement and proxy voting decisions are undertaken by third-party investment advisors.
Vanguard’s most recent Global Proxy Voting Policy analyses companies’ corporate governance practices around four pillars (Vanguard, 2025[49]):
1. Board composition and effectiveness: Vanguard aims to understand how portfolio company boards fulfil their duties effectively. This includes assessing board composition for long-term success, consulting management on strategy and risk oversight, aligning executive incentives with shareholder interests, and safeguarding shareholder rights. Vanguard strives for independent, experienced, committed, capable and diverse board directors to best represent shareholder interests.
2. Board oversight of strategy and risk: Vanguard acknowledges that boards are critical in overseeing their companies’ risks and long-term strategies. Vanguard centres its engagement on understanding the boards’ strategy formation, risk evaluation processes, and disclosure of oversight activities to determine whether investors have insight into a company’s long-term sustainability and accurate valuation based on disclosed material risks, including environmental and social factors.
3. Executive pay: Vanguard emphasises the impact of executive compensation on long-term investment returns, stressing the importance of linking pay to company performance compared to peers. Additionally, it opposes a one‑size‑fits‑all approach to executive pay, advocating for consideration of industry, company size, maturity and region. Vanguard recommends incorporating corporate governance practices like shareholder advisory votes and board committee evaluations into compensation decisions.
4. Shareholder rights: Vanguard considers that effective corporate governance includes shareholders having the ability to influence and endorse changes in governance practices and board composition in line with their ownership of a company’s shares. Vanguard considers it relevant for companies to implement appropriate governance measures, like annual director elections requiring a majority of votes, to ensure that boards and management act in shareholders’ best interests.
Norges Bank Investment Management (NBIM)
Norges Bank Investment Management (NBIM) manages the Norwegian Government Pension Fund Global and it acknowledges that the partial ownership of the world’s largest companies can influence their practices to encourage long-term value creation while reducing negative impacts on the environment and society. This responsible business strategy supports NBIM’s goal of achieving the highest possible returns and maintaining manageable levels of risk (NBIM, 2024[50]).
NBIM prioritises engagement with companies to improve long-term financial performance and to reduce the financial risks associated with environmental and social practices of investee companies (NBIM, 2025[51]). Therefore, it monitors the ESG performance of the companies it invests in, calling it an “active ownership” approach (NBIM, 2024[52]). Based on international standards, including the UN Global Compact, OECD Guidelines for Multinational Enterprises and the UN Sustainable Development Goals, NBIM sets clear expectations on different fronts, including:
1. Climate change and the environment: Companies are expected to address challenges relating to climate change, water management and biodiversity, among others. NBIM considers the guidance offered by international initiatives such as the Taskforce on Climate‑Related Financial Disclosures (TCFD) and the TNFD.
2. Social: NBIM expects companies to respect human and children’s rights, manage human capital responsibly and address consumer-related risks. Companies should comply with the UN Guiding Principles on Business and Human Rights, implement policies to uphold these rights, assess social impacts, engage with stakeholders, and integrate these considerations into strategy and risk management. Companies must also combat corruption through clear policies, prudent tax practices, and transparency in economic value generation. NBIM expects that companies assign responsibilities, oversee management and report on their efforts in these areas.
3. Governance: NBIM regularly publishes position papers on specific corporate governance topics such as board independence and diversity, time commitment of board members, multiple share classes and related-party transactions.
After setting expectations for investee companies and sharing their opinions on key issues, NBIM assesses individual companies against these expectations and positions. If a company does not meet the expectations and there are no credible plans for reducing ESG risks, NBIM may decide to pursue an ESG risk-based divestment which is a financial decision. This is different from ethical exclusions, where NBIM may not invest, because a company’s products or conduct violate fundamental ethical norms. All of NBIM’s ethical exclusions are based on recommendations from an independent Council on Ethics.
Concerning its voting practices, NBIM has disclosed its global voting guidelines following the G20/OECD Principles of Corporate Governance, UN Global Compact, UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises (NBIM, 2025[53]). The guidelines contain principles that establish NBIM’s expectations in different areas, including board independence, board composition, board accountability, shareholder protection and company reporting. NBIM discloses its voting instructions five days before the shareholder meeting, where applicable, and in 2023 began publishing an annual voting report at the end of the voting season.
Amundi
Amundi is a large French asset manager offering investment funds that follow active and index investment strategies. Integrated in its Global Responsible Investing objectives, Amundi’s engagement efforts aim to support investee companies’ consideration of ESG risks and opportunities (Amundi, 2025[54]). Since 2019, Amundi has concentrated its active stewardship activity in two priority areas: climate transition and social cohesion. Nevertheless, engagement activities have also covered additional areas, namely natural capital preservation, product, client and societal responsibility, governance for sustainable development, as well as dialogue to foster a stronger voting exercise. Amundi’s ESG research, engagement and voting team is responsible for developing tools to guide investment professionals in selecting the engagement themes and the targeted issuers.
All open engagements are recorded in a central tool shared with all investment professionals for transparency and traceability. The tool keeps track of the feedback on engagement topics and the progress on KPIs for performance improvement. An internal system of milestones assesses progress towards such KPIs. Amundi can consider further escalation if an engaged company has not demonstrated satisfactory progress over time. Escalation modes include (in no particular order) negative overrides in one or several criteria of the ESG score, asking questions at annual general meetings, votes against management, public statements, ESG score caps and ultimately divesting if the matter is critical.
To assure transparency and implement its Global Responsible Investing objectives, Amundi published its voting policy (Amundi, 2025[55]). It also sets its expectations on different fronts, including shareholder rights, boards, committees and governing bodies, financial structures, and remuneration policy. Amundi has also centralised the exercise of voting rights within the Voting and Corporate Governance team. The group co‑ordinates all voting-related tasks, such as monitoring shareholder meetings within the voting scope or managing relations with custodians and proxy voting companies.
Government Pension Investment Fund (GPIF)
The GPIF is one of the largest institutional investors in the world, managing assets for Japan’s public pension system. Established in 2006, the GPIF operates as an independent administrative institution under the Japanese Government. Its overarching goal is to contribute to the stability of the national pension system by securing the investment returns that it requires with minimal risk and from a long-term perspective to the sole benefit of pension recipients.
GPIF relies primarily on external asset managers to make investment decisions, but this is supported by diligent monitoring of external managers. This includes GPIF continuously monitoring the stewardship activities of asset managers, including their exercise of any voting rights, and proactively undertaking dialogue with external asset managers.
GPIF requires external asset managers to comply with their Stewardship Principles & Proxy Voting Principles (GPIF, 2020[56]). Where an asset manager does not comply with any of the principles, they are required to explain the rationale for non-compliance. GPIF’s Stewardship Principles include the following requirements:
1. Corporate Governance Structure of Asset Managers: External asset managers awarded a mandate from GPIF should adopt Japan’s Stewardship Code, have robust internal corporate governance structures, sufficient internal resources dedicated to stewardship, and explain how their remuneration and performance management policies are aligned with the interests of GPIF.
2. Management of Conflict of Interest by Asset Managers: External asset managers are required to appropriately manage conflicts of interest including in relation to voting decisions to put the beneficiaries’ interests first.
3. Policy for Stewardship Activities, including Engagement: This section articulates GPIF’s expectations of external asset managers in areas such as focussing on long-term risk-adjusted returns rather than short-term outcomes, integrating stewardship and ESG factors into investment decision making, engaging with a wide variety of stakeholders to improve the sustainability of markets in which they invest, and engaging with companies where they choose not to comply with local corporate governance code requirements.
4. Exercise of Voting Rights: Where exercising voting rights, external asset managers should adhere to GPIF’s Proxy Voting Principles. When using a proxy voting adviser, asset managers should undertake proper due diligence prior to appointment and routinely monitor them thereafter to ensure service quality.
GPIF’s Proxy Voting Principles set out expectations for external asset managers in relation to (GPIF, 2020[56]):
1. Exercising all voting rights in a manner consistent with their ongoing corporate engagements and other stewardship activities.
2. Developing and publishing publicly proxy voting policy or guidelines that will contribute to the maximisation of shareholders long-term interests.
3. Ensuring they have sufficient communication with companies in voting decisions.
4. Considering ESG issues when exercising voting rights.
5. Exercising voting rights in support of the corporate governance codes established by the individual countries in which their investee companies are domiciled.
6. Where the services of proxy advisors are utilised, their recommendations should not be mechanically followed, and careful consideration should be given to all voting decisions.
7. Disclosing their entire voting record on an individual company and individual agenda item basis.
8. Disclosing the rationale for their voting decisions based on necessity and/or importance as appropriate.
9. Disclosing voting records and the rationale for voting decisions including to investee companies where requested.
Enhancing direct interactions between the board of directors and management with institutional investors can significantly strengthen this engagement, provided all shareholders are treated equally.
The board of directors has an oversight duty that, if not adequately fulfilled, can undermine institutional investors’ capacity to optimise their investment returns. If the board’s responsiveness to institutional investor concerns involves a proactive approach, it can foster a long-term relationship between these parties. Independent directors can play a vital role in this context by offering an objective perspective when assessing the performance of senior executives, thus having the ability to increase the quality of dialogue beyond meeting regulatory disclosure requirements or issuing press releases.
This dialogue with the board has the potential to convey the company’s needs and challenges effectively. From the board’s perspective, it can improve its understanding of institutional investors’ expectations and create self-awareness of, for instance, the current board’s capabilities. Building detailed institutional investor profiles, including governance knowledge, voting trends, investment patterns and level of flexibility, can empower the board to challenge one‑size‑fits‑all institutional investors’ policies, potentially leading to more tailored and effective strategies (Freedman, Hall and Robertson, 2019[57]).
The effectiveness of the dialogue between institutional investors and boards can be influenced by companies’ transparency in disclosing their engagement policies. Globally, more than 9 600 companies, which account for 86% of market capitalisation, disclose policies on shareholder engagement (Figure 2.3). In Europe and the United States approximately 90% of companies by market capitalisation disclose policies to facilitate shareholder engagement, while in Asia, this share averages 73%. The disclosure of policies on shareholder engagement considers whether the company has a policy to enable shareholder engagement, resolutions or proposals. It also considers whether the company facilitates shareholders’ right to ask a question to the board of directors or senior executives or allows shareholders to table proposals at shareholder meetings.
Source: OECD (2025[45]), Global Corporate Sustainability Report 2025, https://doi.org/10.1787/bc25ce1e-en. OECD Corporate Sustainability dataset, LSEG.
While a significant proportion of companies globally disclose their shareholder engagement policies, it is likely that most interactions between boards and shareholders occur privately, resulting in limited public information about these engagements (Gatti, Strampelli and Tonello, 2022[58]). However, a survey targeted to corporate secretaries, general counsels and investor relations officers at US Securities and Exchange Commission (SEC)‑registered publicly listed companies and supplemented by disclosure data on corporate‑shareholder engagement from Russell 3 000 and S&P 500 companies and insights on the 2022 proxy season, found that shareholder engagement is more prevalent among large and mid-sized companies. This engagement primarily involves major asset managers, particularly with the largest publicly listed companies. Overall, engagement was found to be consequential, resulting in modifications to corporate practices, a withdrawal of shareholder proposals, alterations to previously announced proxy votes and the inclusion of director nominees proposed by engaged shareholders (Gatti, Strampelli and Tonello, 2022, p. 5[58]).
A study of 31 Principles for Responsible Investment (PRI)-co‑ordinated engagement projects initiated between 2007 and 2015 indicates that the combination of lead investors working with supporting investors proves to be effective in achieving engagement objectives. The study includes 1 654 engagements targeting 960 publicly listed companies located in 63 jurisdictions involving a total of 224 different investment organisations from 24 jurisdictions, with the majority headquartered in Canada, the Netherlands, the United Kingdom and the United States (Dimson, Karakaş and Li, 2023[59]).
The increase in assets held by large asset managers (Figure 1.4) has significantly expanded their voting rights across various industries and markets. One of the tools to exercise those voting rights is through the development of engagement and voting policies that provide the prioritisation of their objectives.
As discussed in Section 2.3, institutional investors have not only engaged with their investee companies in traditional corporate governance issues but have also increasingly engaged in matters such as sustainability-related disclosure and GHG emission reduction. In this sense, it has been claimed that this type of engagement could be defined as a form of “privatised regulation – a body of standards and mandates that can be more stringent than existing law, enforced with penalties, and applied across the market” (Lund, 2022[60]).The enforcement of this type of “privatised regulation” will not rely upon fines or other forms of sanctions but rather on eventual reputation costs or board removal.
Two topics where “privatised regulation” had become particularly influential were improving board diversity and managing climate‑related risks at public companies in the United States. For board diversity, large index asset managers in the United States led gender diversity campaigns to increase the number of female directors. By 2020, the number of public companies without a female director dropped significantly with research indicating asset managers engagement and voting policies played a crucial role (Lund, 2022, p. 21[60]).
Similarly in 2020, asset managers pushed listed companies to address climate change through carbon reductions and enhanced disclosures in line with reporting standards such as the Sustainability Accounting Standards Board (SASB) Standards and TCFD Recommendations. In some cases, institutional investors supported shareholder climate‑related proposals and used their significant voting power to vote against laggard companies. Research indicates the actions of large institutional investors led to reduced emissions and better climate‑related disclosures (Lund, 2022, p. 27[60]).
The increased asset manager engagement in sustainability-related risks and opportunities may be partly explained by the fact that they might be motivated to internalise the negative externalities that impact their portfolio companies (Condon, 2020[61]). Moreover, since investors aim to maximise risk‑adjusted returns, they benefit if they can reduce systematic risk, such as measures to reduce climate change or improve social stability (Gordon, 2022[62]).
Nevertheless, the business models of large, diversified asset managers may lead them to prioritise governance solutions that are scalable and cost-efficient (Lund, 2022[60]). As a result, index investors may be particularly inclined to engage on visible issues that matter to their clients, potentially at the expense of less visible corporate engagements, which may be important for value maximisation. In addition, asset managers may only have the incentive to enforce modest changes in investee companies that would not be controversial among their clients, such as marginally improving board gender diversity.
While critics argue that asset managers act as privatised regulators, this perspective may misrepresent their role in capital markets if the legal framework is fully enforced. As fiduciaries, institutional investors must prioritise their clients’ best interests (Section 3.4.1). In most jurisdictions, they cannot pursue sustainability goals at the expense of risk-adjusted returns without a clear client mandate, as this would breach their fiduciary duties (Section 3.4.2). This limits how far their stewardship practice can go in addressing environmental and social issues that are not directly tied to value maximisation or preservation (Section 3.4.2).
← 1. The Code was developed by the Australian Council of Superannuation Investors (ACSI), whose members include Australian and international asset owners and institutional investors.