Enabling Investor Stewardship in the Global Public Equity Markets

The report examines the relationship between institutional investors and public corporations, identifying 'short-termism' and principal-agent misalignments as primary barriers to long-term value. It defines investor stewardship as a combination of engagement and voting to promote corporate governance consistent with long-term value creation. The document categorizes institutional investors into four pillars—index investors, in-house active managers, external active managers, and activist investors—detailing the specific goals, challenges, and incentives for each. It further outlines a hierarchy of stewardship impact areas, ranging from changing corporate fundamentals to promoting strong standards, and lists various engagement options from coordinated standards to direct board representation.

• The investor-corporate relationship is hindered by 'short-termism' and misalignments in time horizons, where pressure on senior executives to demonstrate strong short-term financial performance can lead to the neglect of long-term needs, such as delaying critical capital expenditure.
• Investor stewardship is defined as the use of engagement and voting to encourage corporate governance practices that support long-term value creation for shareholders.
• Public equity markets are seeing a decline in the number of listed companies, partly because private companies face less pressure to prioritize short-term concerns over long-term goals compared to public companies.
• The 'Big Three' index managers (BlackRock, Vanguard, and State Street) hold significant influence in the US market, representing the largest owners in 88% of S&P 500 corporations and 40% of all US publicly listed firms as of a 2016 study.
• Institutional investors are categorized into four pillars with distinct stewardship profiles: Index investors focus on universal beta and strong standards; In-house active managers seek to align capital with philosophical beliefs and multigenerational returns; External active managers aim for alpha through fundamental value-add; and Activist investors seek alpha through large corporate changes.
• Stewardship impact is organized into a three-tier hierarchy: Tier 1 focuses on changing corporate fundamentals (best for active managers); Tier 2 focuses on influencing long-term strategy (best for active and activist managers); and Tier 3 focuses on promoting strong standards (best for passive investors).
• Investors have a range of engagement options varying by cost and specificity, from low-cost 'Coordinated standards' and 'Vote proxies' to high-cost 'Sit directly on board' and 'Control company capital'.

APA

World Economic Forum (2021). Enabling Investor Stewardship in the Global Public Equity Markets. http://www3.weforum.org/docs/WEF_Enabling_Investor_Stewardship_in_the_Global_Public_Equity_Markets_2021.pdf

Chicago

World Economic Forum. Enabling Investor Stewardship in the Global Public Equity Markets. 2021. http://www3.weforum.org/docs/WEF_Enabling_Investor_Stewardship_in_the_Global_Public_Equity_Markets_2021.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Enabling Investor Stewardship in the Global Public Equity Markets |date=June 2021 |url=http://www3.weforum.org/docs/WEF_Enabling_Investor_Stewardship_in_the_Global_Public_Equity_Markets_2021.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2021enabling, author = {{World Economic Forum}}, title = {{Enabling Investor Stewardship in the Global Public Equity Markets}}, institution = {World Economic Forum}, year = {2021}, month = jun, url = {http://www3.weforum.org/docs/WEF_Enabling_Investor_Stewardship_in_the_Global_Public_Equity_Markets_2021.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }