Stewardship and institutional investor engagement

2. Ensuring the basis for an effective stewardship framework

Institutional investors play an important role in supporting well-functioning capital markets and efficient price discovery. This role depends on the availability of high-quality, accessible, and comparable market and issuer-specific information. This includes timely, accurate, and material financial disclosures that enable institutional investors to assess performance, risks, and value creation, and to engage effectively with issuers. Effective stewardship can also promote better corporate disclosure, as institutional investors can actively engage and vote in favour of enhanced corporate governance practices and more reliable financial reporting.

Regulatory frameworks for stewardship may encourage transparency, accountability, and fair market practices. This would help foster trust and confidence in capital markets, which are essential for long-term investment and sustainable economic growth. Transparent voting and engagement practices – such as disclosure of voting policies and engagement priorities – enable clients and other market participants to understand how ownership rights are exercised and how stewardship may influence corporate behaviour. Conversely, weak disclosure and opaque practices can erode trust, undermine market integrity, and encourage unethical behaviour.

Stewardship frameworks may be grounded in the rule of law and safeguard investors’ property rights through clear, consistent, and enforceable requirements. Laws, regulations, disclosure, and contractual agreements may define institutional investors’ rights and responsibilities in relation to voting, engagement, collaboration, and disclosure, and be applied consistently over time to support legal certainty. Stewardship frameworks and expectations may reflect institutional investors’ fiduciary duties and preserve their discretion to exercise voting and ownership rights in the best interest of their clients.

Institutional investors may exercise their property rights by setting mandates for asset managers, or investing in vehicles that reflect investors’ preferences, including where these include non‑financial objectives, such as environmental, social, national security-related or other public policy objectives that have been endorsed or agreed upon by institutional investors’ clients.

2.1. The division of responsibilities among different public authorities and industry bodies for stewardship frameworks

Stewardship frameworks encompass a combination of laws (e.g. company law), regulations (e.g. securities regulation), stewardship codes, and other mechanisms (e.g. accreditation by industry associations). They vary across jurisdictions in their mix of public and private requirements and recommendations aimed at enhancing governance, transparency, and the management of conflicts of interest. Stewardship frameworks may be established by public authorities or industry bodies and may differ by type of institutional investor (e.g. mutual funds, pension funds, or insurers). In many jurisdictions, stewardship codes set standards for engagement and other stewardship activities between institutional investors and issuers. Stewardship codes – issued by public authorities or industry bodies – often operate on a comply or explain basis and are increasingly supported by implementation, monitoring, and periodic review mechanisms to promote effective application and maintain their continued relevance.

Given the complexity of stewardship frameworks, which may involve multiple public authorities and industry bodies, there is a risk of unintentional overlaps or even conflicts that may hinder institutional investors’ ability to pursue their stewardship effectively. To mitigate this, policymakers and regulators may aspire to a coherent institutional and regulatory framework in which responsibilities for supervision, implementation, and enforcement are clearly defined and formalised. This can allow the competencies of complementary bodies and agencies to be respected and used most effectively. When regulatory responsibilities or oversight are delegated to non-public bodies, it may be desirable to periodically assess whether such delegation remains appropriate.

Public authorities and industry bodies responsible for stewardship frameworks may want to consider whether they have the authority, autonomy, integrity, and capacity to fulfil their duties in a professional and objective manner. This may include a clear mandate to develop, maintain, and promote stewardship frameworks, issue guidance, clarify expectations, and, where relevant, monitor implementation, as well as to encourage the adoption of sound stewardship practices by market participants. They may need to be adequately resourced to engage with market participants, review evolving practices, and update frameworks in response to changes in capital markets. Their responsibilities may ideally be exercised in a timely, transparent, proportionate, and evidence‑based manner, recognising the diversity of market participants.

2.2. Internationally recognised stewardship good practices

In developing or revising stewardship frameworks, policymakers and regulators may consider international good practices, reflecting the significant concentration of capital held by large institutional investors in listed companies across markets, as well as the high levels of cross-border equity ownership by institutional investors. For instance, in almost 80% of OECD, G20 and Financial Stability Board (FSB) economies, the share held by domestic institutional investors is smaller than that held by their non-domestic counterparts (OECD, 2025[1]). Therefore, while it is important to account for market-specific characteristics, greater harmonisation of stewardship frameworks across jurisdictions offers a dual benefit: it can facilitate issuers’ engagement with investors based in multiple jurisdictions and reduce institutional investors’ compliance burdens associated with navigating multiple regulatory regimes. In jurisdictions where stewardship frameworks are limited or underdeveloped, targeted initiatives may be important to raise awareness among institutional investors of the benefits of adopting internationally recognised stewardship good practices.

If new stewardship-related requirements or recommendations are considered, they can be designed in a way that makes it possible to implement and enforce them in an efficient and even-handed manner covering all parties. Consultation by public authorities and industry bodies with issuers, institutional investors, market service providers and other market participants, may be an effective way of doing this. To avoid over-regulation, unenforceable rules, and unintended consequences that may impede or distort market dynamics, policy measures may be designed with a view to their overall costs and benefits.

2.3. Proportionality of stewardship frameworks and avoiding box-ticking

The ability and willingness of institutional investors to engage with issuers vary widely. For some, engagement and stewardship, including the exercise of voting rights, is a natural part of their business model. Others may adopt a business model and investment strategy that does not include or motivate spending resources on stewardship. Stewardship frameworks may need to ensure that expectations and obligations placed on institutional investors are proportionate to their capacity and market impact while in line with the mandates from ultimate clients. Larger institutional investors, which typically have greater resources to collect and disclose information, may be subject to higher expectations for disclosure and transparency regarding their stewardship objectives and activities, while requirements for smaller institutional investors may need to be more proportionate. Moreover, disclosure expectations may need to be aligned with what an institutional investor has committed to its clients, as there is little rationale for requiring an investor that has clearly articulated limited stewardship objectives to justify, for example, why it has not voted at shareholder meetings.

Where stewardship is not part of the institutional investor business model and investment strategy, mandatory requirements to undertake specific activities could be carefully drafted to avoid a box‑ticking approach by institutional investors. This risk is reflected, for example, in differing approaches to voting across jurisdictions, where some institutional investors are required to vote at shareholder meetings while others may be restricted from doing so. While the goal of increasing shareholder participation in markets with low levels of attendance at shareholder meetings may be laudable, mandating voting may, in some circumstances, reduce the relative influence of institutional investors with greater capacity and expertise to assess issues in the interests of shareholders as a whole.

Approaches to encouraging or requiring effective stewardship practices may need to be tailored to achieve desired outcomes in light of specific market circumstances. For instance, in markets where major institutional investors are subsidiaries of broader financial groups, effective stewardship may depend on requirements for the identification, management and disclosure of conflicts of interest. Additionally, disclosures pursuant to stewardship frameworks may focus on the most meaningful activities for which each market participant is responsible, while allowing sufficient flexibility to accommodate different market structures and delegation models. This approach recognises that, while asset management functions may be delegated, voting and stewardship engagement may, in some cases, be retained in-house.