ARTICLE 17 Nov 2023

Stewardship in AQTION

How the worlds largest 65 investors steward their portfolio companies.

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AQTION leveraged its proprietary database powered by SquareWell Partners to analyze how the world’s largest 65 investors (Assets Managers, Sovereign Wealth Funds, and Pension Funds collectively representing nearly USD 81 trillion in AUM) are stewarding their portfolios and evaluating environmental, social, and governance (“ESG”) issues and shareholder activism.

1. Focus on Stewardship

In recent years the world’s largest investors formed dedicated teams to oversee discussions with portfolio companies on “ESG” issues and make decisions on how to vote at companies’ general meetings. AQTION notes that 55 of the Top 65 investors have Stewardship Teams as either the standalone decision-maker or together with a Portfolio/Fund Manager while only two (2) of the Top 65 investors fully outsource their voting activities to Proxy Advisors.

Proxy Advisors offer guidance to investors on how they should vote at annual general meetings and are used to fill gaps in resources or knowledge, allowing investors to potentially vote on thousands of portfolio companies. Focusing solely on the two largest global players,

 AQTION notes that ISS serves as the “primary” Proxy Advisor to 51 of the Top 65 investors while Glass Lewis, on the other hand, serves as the “primary” Proxy Advisor to eight (8) of the Top 65 investors.

Even if investors receive recommendations from Proxy Advisors, most of the Top 65 investors have their own internal voting policies and AQTION’s review finds that approximately half of the Top 65 investors now exhibit a “Low” reliance on the recommendations of their service provider, with a significant portion of these investors actually taking a stricter approach than Proxy Advisors.

2. How Investors Assess Portfolio Companies

AQTION notes that the vast majority of  the Top 65 investors publicly disclose a Voting Policy on how they assess general meeting agenda items.

AQTION enables users to deep-dive and compare investor expectations on “ESG” topics ranging from Capital Allocation to Climate Action. We provide below, as an extract of this study, the Top 65 investors’ views on relevant governance topics that may be of interest for companies in the upcoming general meeting season:

  • Combined Chair-CEO: The combination of the Chair and CEO roles remains a divisive topic amongst investors. While 18 investors state that they would systematically vote against re-electing a combined Chair-CEO, 32 investors would evaluate such positions on a case-by-case basis, considering mitigating factors such as the overall independence of the board or its key committees, the presence of a Lead Independent Director, etc.
  • Succession Planning: Succession planning, whether it be for management or non-executive director roles, is considered as one of the core duties of any board and critical to a company’s long-term success. AQTION notes that more than half of the Top 65 investors provide clear expectations on the need for succession planning and what type of disclosures they expect from portfolio companies.
  • “ESG”/Sustainability Criteria in Executive Pay: Not all investors expect companies to incorporate “ESG”/Sustainability criteria in executive pay. AQTION notes that 34 investors of the Top 65 communicate a public position on this topic, who also stress that such criteria should be material, quantifiable, transparent, and sufficiently challenging.

Beyond actual policies, AQTION provides insight into “stewardship reports“, which more and more investors (53 out of Top 65) are now publishing to shed light onto their position on certain topics but also what they may be focusing on in their engagements with portfolio companies.

Role of ESG Ratings and Data Providers

Both active and passive strategies have started incorporating “ESG” factors into their investment decision-making processes in recent years, increasing their dependency toward the data provided by ESG ratings and data providers. Of the mainstream ESG data providers available, AQTION notes that MSCI is the most popular (used by 48 of the Top 65 investors), followed by Sustainalytics, Bloomberg ESG and ISS ESG.

3. Main Disclosure Frameworks and Topical Guidance on Sustainability Topics

AQTION notes the emergence in recent years of numerous collaborative initiatives aimed at standardizing “ESG” information and encouraging investors to pursue climate-related lobbying to pressure companies to take action:

  • Climate Action 100+ and the Institutional Investors Group on Climate Change (“IIGCC”) are investor coalitions tasked encouraging companies in key sectors to take concrete steps in tackling climate change, are supported by 47 and 38 of the Top 65 investors, respectively.
  • The Net Zero Asset Managers Initiative (“NZAM”), which represents an international group of asset managers committed to supporting net zero by 2050 across their investments is adopted by 35 out of 65 Top investors.
  • TCFD/TNFD initiatives aim to develop a risk management and disclosure framework for climate- and nature-related risks and are adopted by 54, and 34 of the Top 65 investors, respectively.

In the same way they do for governance topics, investors are increasingly willing to communicate their expectations on key environmental and social topics. AQTION notes that 40 of the Top 65 investors have communicated their expectations on key environmental and social topics, which have all been captured by AQTION for the benefit of its clients.

4. Shareholder Activism

Shareholder Activism is increasingly perceived as a useful market force. Furthermore, increasingly investors are becoming transparent in their evaluation of contested situations evidenced by 30 of the Top 65 investors disclosing their position.

No longer limited to hedge funds, activism can be initiated by any investor and aimed at companies in any market, sector, or size. More specifically, AQTION notes that 18 of the Top 65 investors have publicly voiced concern against portfolio companies in the past three (3) years (typically issuing a press release or media publication, following the exhaustion of private engagement).

Despite the reduced level of support by the three top passive managers for shareholder proposals on ESG topics, AQTION notes that traditional long-term investors now leverage activist tactics to escalate E&S concerns and will go as far as filing or co-filing “ESG” shareholder proposals at portfolio companies: 13 of the Top 65 investors filed or co-filed a shareholder proposal related to an “ESG” topic at one of their portfolio companies over the past 3 years, notably Norges Bank IM (first time in 2023), AXA IM and Amundi AM.

This article is a summation of a wider report published by AQTION. To request a copy of the study, please fill in the form or e-mail

Authored By: Will Samuels, Analyst at SquareWell Partners