After the initial ESG hype in the world of finance was followed by ESG backlash and accusations of greenwashing, what matters in the world of sustainable finance now is rigorous, sustained action. Investors are under growing pressure to prove that they’re walking the talk on ESG (environmental, social, and governance) performance. Enter: ESG stewardship.
ESG stewardship, where investment firms engage with the companies they invest in to influence sustainability strategy, is one of the most powerful tools they have today to make a meaningful difference in global environmental and social concerns.
The problem, though, is that stewardship teams, in their quest to rewrite the narrative on ESG, are being asked to do more than ever. They need to engage meaningfully with portfolio companies, set clear expectations, track follow-through, and report on outcomes, all while keeping up with fast-changing regulations and frameworks. The stakes are high. Stewardship is central to investment strategy, reputation, and climate resilience.
Major regulatory frameworks are reinforcing these expectations. The UK Stewardship Code, the EU’s Sustainable Finance Disclosure Regulation (SFDR), and other national ESG disclosure regulations (like the CSRD) will require investment firms of a certain size to show how they assess and influence sustainability performance. Meanwhile, high-profile examples, like BlackRock urging portfolio companies to publish climate transition plans, have set a precedent for investor action.
According to PwC, ESG-related assets are expected to make up more than half of all professionally managed investments globally by 2026, reaching US$33.9 trillion—up from US$18.4 trillion in 2021.
Meanwhile, despite the recent ESG backlash, Bloomberg found that investors and their C-suite counterparts are both still embracing ESG, with 85% of investors and companies planning to boost ESG investment over the next five years.
What is ESG stewardship?
ESG stewardship is how investors use their influence to promote long-term, sustainable value creation at the companies they invest in. That influence can take many forms: direct engagement, proxy voting, shareholder proposals, and more. But the goal is consistent: to encourage better ESG performance and disclosure.
While the term “stewardship” is sometimes used broadly, here it refers specifically to the actions of asset managers, asset owners, and other investors engaging with companies over time. Basically, ESG stewardship is about how investors help shape their portfolio companies’ ESG programs through dialogue, feedback, and accountability.
Unlike exclusionary strategies that simply screen out companies based on ESG criteria, stewardship focuses on responsible management and gradual improvement. Investors can’t (or shouldn’t) just walk away from ESG laggards. Instead, they work with them to identify gaps, strengthen governance, and drive change. This approach reflects a belief that long-term value is built by companies that manage sustainability risks and respond to stakeholder expectations.
Why ESG stewardship is essential for corporate sustainability
Turn sustainability commitments into real-world outcomes
It’s one thing for companies to set ESG targets, but it’s another to deliver on them. Stewardship helps bridge that gap. Through ongoing engagement, investors can ask tough questions, push for transparency, and ensure that sustainability plans are backed by action.
For example, an investor might engage a company on a net-zero goal that lacks interim targets or credible execution plans. By requesting clarification, setting milestones, and revisiting progress over time, stewardship teams can transform vague ambition into structured, measurable action.
Strengthen stakeholder trust and credibility
When investors consistently engage on ESG issues, they send a strong signal to the market. That signal can enhance a company’s credibility with investors, regulators, employees, customers, and communities. Stewardship shows that sustainability is being taken seriously and that progress matters.
This trust can also extend to investors themselves. As asset owners and regulators scrutinize stewardship performance, the firms that can show consistent engagement and clear outcomes will be better positioned to attract mandates and demonstrate value to clients.
Support long-term business resilience
ESG stewardship is fundamentally about managing risk and building resilience. By engaging with companies on climate strategies, governance structures, and social impacts, investors can help identify potential pitfalls early and support companies in navigating regulatory, reputational, and operational risks.
For example, companies that fail to prepare for climate-related regulation may face penalties, loss of access to capital, or declining asset values. Stewardship allows investors to raise red flags early and help portfolio companies future-proof their operations. This proactive engagement reduces the risk of regulatory non-compliance and enhances long-term competitiveness.
How investors shape ESG stewardship expectations
Stewardship teams play a key role in shaping how companies think about ESG. That influence comes through multiple channels: proxy voting, direct engagement, and shareholder proposals, among others. Over time, these activities help set expectations and define what good ESG performance looks like.
Many firms define their stewardship priorities through materiality assessments or alignment with global initiatives. For example, members of Climate Action 100+ have committed to engaging the world’s largest emitters on climate risk disclosure and transition planning. To maintain credibility, investors increasingly publish annual stewardship reports that outline objectives, engagement methods, voting records, and outcomes. This transparency builds trust and demonstrates accountability to clients, regulators, and the public.
Global frameworks like the Principles for Responsible Investment (PRI) have raised the bar for stewardship transparency and rigour. Companies are expected to respond by aligning with investor expectations, disclosing how they’re addressing ESG concerns, and demonstrating progress on material issues.
Common ESG stewardship challenges
Siloed teams and lack of cross-functional alignment
From the investor perspective, one of the biggest red flags is when ESG responsibilities are siloed within companies. If sustainability sits separate from finance, risk, or strategy, it’s hard to embed ESG into decision-making. Stewardship efforts often focus on encouraging companies to take a more integrated approach.
This is especially true when ESG goals are set by one team but not operationalized by others. For instance, a company may publish climate targets while continuing to allocate capital to carbon-intensive assets. Without clear alignment across departments, stewardship conversations can stall or lead to inconsistent responses.
Difficulty tracking and communicating ESG impact
For stewardship teams, inconsistent data and reporting make it difficult to assess a company’s true ESG performance. Disclosures themselves can be overwhelming, or suffer from the dual problem of “too much and not enough.” But a bigger problem than poor disclosure is the data that underpins it. Lacklustre disclosures are the result of data not being tracked, benchmarked, or shared in ways that support an open dialogue around ESG performance.
Fragmented reporting also makes it harder for investors to tailor engagement strategies, compare progress across companies, or report outcomes back to clients. This slows down engagement cycles and limits the ability to scale stewardship across large portfolios.
Rising scrutiny and fear of greenwashing
Both investors and companies are under increasing scrutiny. Stewardship teams must be able to back up their claims with verifiable engagement records and tangible outcomes. At the same time, they’re asking portfolio companies to move beyond vague commitments and demonstrate real impact.
When companies publish ESG targets without clear plans or evidence of progress, they risk being accused of greenwashing. Investors who fail to challenge these gaps may also come under fire. In some jurisdictions, stewardship activity is now subject to regulatory review, making it essential that investors not only engage but also show that their engagement is producing meaningful change.
Strengthen ESG investing and stewardship using technology
As the demands on stewardship teams grow, many are turning to technology for help. AI-powered platforms like Manifest Climate can support more consistent, scalable, and data-driven engagement.
These tools help investors track ESG disclosures across portfolios, identify gaps, benchmark companies against peers, and align engagement priorities with investor frameworks. Instead of relying on spreadsheets or anecdotal notes, stewardship teams can use centralized systems to monitor performance, flag risks, and surface new engagement opportunities.
For example, some platforms automate the analysis of annual reports, sustainability disclosures, and regulatory filings, surfacing ESG gaps in seconds. They can also help track whether a company is improving over time, monitor news signals, and benchmark engagement priorities across sectors. Without these tools, stewardship teams often spend hours digging through PDFs, relying on disconnected notes and spreadsheets to manage dozens of engagements.
Technology also helps connect the dots between company disclosures, external ESG signals, and internal investment priorities. That means better oversight, more targeted engagement, and clearer reporting.
| Real-world example: how KingSett Capital scaled ESG oversight with Manifest Climate KingSett Capital, one of Canada’s leading private equity real estate firms, needed a better way to evaluate ESG risks across its portfolio. With multiple assets and partners, manual tracking wasn’t cutting it. Using Manifest Climate, the firm centralized its ESG oversight and quickly identified disclosure gaps aligned with their chosen framework. The platform helped KingSett assess risks and opportunities across properties, improve reporting consistency, and align stewardship efforts with investor expectations. As ESG disclosure requirements evolve, KingSett is now better equipped to support climate-aligned investment decisions and engage with stakeholders across its portfolio. Read the full case study → |
Practical tips and best practices for ESG stewardship
Stewardship is most effective when it’s embedded across the investment process rather than treated as a standalone function. That means aligning engagement efforts with firm-wide ESG priorities, industry standards, and client expectations.
Best practices include:
- Mapping stewardship goals to material ESG issues and sector-specific risks
- Assigning clear ownership of engagement activities and documenting outcomes
- Ensuring board- or committee-level oversight of stewardship strategy
- Using escalation frameworks when progress stalls or concerns go unaddressed
Stewardship strategies should also be tailored by company type and maturity. Early-stage firms may need foundational guidance, while mature companies should be pushed on implementation and accountability. Internal training and collaboration with investment, legal, and compliance teams can improve alignment and strengthen messages during engagement. Finally, firms should communicate stewardship efforts clearly to clients, demonstrating how their actions are protecting value and reducing ESG risk.
Done well, stewardship becomes a strategic asset for capital providers.
Stewardship is a strategic lever for climate-aligned growth
At its core, ESG stewardship is about influence, alignment, and long-term value. It helps investors build more resilient portfolios, and it helps companies navigate a changing world with greater clarity and accountability.
As regulations tighten and client expectations rise, stewardship is becoming a core part of every investor’s value proposition. Avoiding ESG risk is one thing, but investors are increasingly expected to contribute to a positive global impact. The firms that do this well will reduce portfolio risk by default, but they’ll also position themselves as credible leaders in the transition to a more sustainable economy.
Technology like Manifest Climate elevates stewardship by giving investors the tools they need to track, measure, and enhance their influence at scale. With better data, smarter workflows, and deeper insights, stewardship teams can go from reactive to proactive, and from compliance to leadership.
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