WeeFin offers insights into current regulations and best practices for effective implementation.
To illustrate our analysis and share their recommendations, we had the chance to interview François Humbert, Engagement Lead Manager at Generali Asset management SGR and Livio Gentilucci, Head of Active Ownership at Generali Asset Management SGR.
Although shareholder engagement is widely favored by financial players, the practice is not currently governed by European regulations. This is one of the areas of development envisaged by the review of SFDR appendices, since the new templates for pre-contractual appendices will henceforth ask the question "Does this product aim to reduce greenhouse gas (GHG) emissions from the activities in which the product invests? If the answer is yes, it will be possible to indicate that this objective will be achieved through engagement. The integration of commitment into the European regulatory framework could be even more important via the review of SFDR level 1 and the creation of labels such as "funds in transition", for which voting and dialogue practices will prove central. This link is underlined by Livio Gentilucci, for whom engagement is an important tool for fully assessing the credibility of companies' transition plans, whereas today's funds opt more for reallocating their assets to reduce GHG emissions. Pending a decision on these overhauls, and in order to begin taking stock of market practices, the French regulator, the AMF, has declared that its supervisory action in 2024 will focus on the voting and shareholder engagement policies of asset management companies.
The UK, ahead in this practice, published the first “Stewardship Code” in 2010, with further details available below. Since then, similar codes have been issued by countries like Japan and Switzerland.
Ultimately, initiatives like PRI and labels support engagement. In particular, the SRI label, with the implementation of the 3rd version of its guidelines since the beginning of 2024, requires labeled funds to adhere to practices that ensure shareholder engagement is not superficial but truly integrated into a fund’s sustainability strategy.
According to Responsible Investor, 57% of investors say they would support new requirements on the transparency of engagement practices. While these opinions are understandable, François Humbert of Generali Asset Management SGR stresses the need to provide clarity rather than complexity, notably through the promotion of common definitions: What is engagement? Does a dialogue to collect data constitute an engagement action? How is impact engagement defined? Etc
Until these definitions are standardized, it is essential to maintain transparency in shareholder engagement reports, categorising actions and objectives: for example, were engagements conducted to gather information or to influence a company?
Best practices for making shareholder engagement a lever for impact
Without regulatory oversight, shareholder engagement can resemble greenwashing more than an impact strategy. Thus, it is crucial to follow recommendations from initiatives and NGOs (e.g., ISR label, Reclaim Finance, PRI). Examples of best practices include:
In addition to implementing and promoting these practices in shareholder engagement policy, other elements should be considered when using engagement as an influence tool. As Livio Gentilucci and François Humbert highlight, to generate positive impact, it is necessary to:
François Humbert also asserts that there is a link between the action of engagement and the end result. This is why Generali Asset Management SGR has introduced the concept of engagement "with additionality", highlighting cases where engaged companies have publicly recognised the added value of Generali Asset Management SGR in the transition of some of their activities.
Engaging collaboratively alongside other financial actors can increase influence, especially for those with relatively low equity stakes in a company. This collaboration also allows for shared costs, pooling knowledge, and expertise among financial actors. However, to ensure collaborative engagement effectiveness, it is essential to set common expectations before meeting the targeted company. As François Humbert states: “Collaborative engagement without prior preparation can ultimately have the opposite effect on the company. Lack of organisation or setting overly broad, numerous, or unrealistic goals can discourage companies and significantly reduce collaborative engagement's potential impact.”
The objectives of engagement actions vary. Some actions aim to promote transparency, while others seek to influence corporate behavior toward greater sustainability. The latter require significant preparation time, research, expertise, and relationship-building with the targeted company. With sometimes limited resources, especially for smaller actors, it may be advisable to focus efforts and resources on a limited number of engagement actions.
This approach ultimately increases chances of success. This was notably the case with the investment firm Engine No. 1, which, despite holding only 0.02% of ExxonMobil shares, successfully influenced board composition toward members with climate-related expertise previously overlooked by the company.
The first edition of the UK Stewardship Code published after the financial crisis in 2010, followed by its second version in 2019, is an essential part of the UK investment ecosystem.
Voluntary signatories of the Code—asset managers, asset owners, and service providers—must apply various principles that promote responsible, active, and engaged investment management in the beneficiaries’ interest.
Every year, signatories must explain how they apply and monitor these principles in a report. While this annual reporting increases transparency and investor accountability, the required effort has been criticised since the Code’s second edition, with signatories mentioning the considerable resource demands of publication.
Thus, in July 2024, the Financial Reporting Council (FRC) announced an upcoming Code revision accompanied by interim changes to ease its application. These initial changes address stakeholder concerns by reducing reporting requirements for existing signatories. Additionally, a full Code revision is expected in the first half of 2026, focusing on purpose, principles, process, the role of proxy advisors, and the Code’s positioning within the broader regulatory engagement framework.
Indeed, the Code’s regulatory positioning is crucial. Widely adopted by fund managers and asset owners, the Stewardship Code maintains a prominent role in the UK, though its future is uncertain as new regulations emerge (TCFD, SDR, TPT, etc.). A fundamental question persists regarding regulatory interoperability in the UK.
As Stewardship Codes proliferate globally to enhance investor involvement in corporate governance, will Europe implement a similar one?
Indeed, in its July 2024 Opinion, a recommendation document to the European Commission on evolving sustainable finance regulations, ESMA called for a European Stewardship Code. The key reasons supporting its implementation include:
→ Encourage shareholder participation
Position investors as a central mechanism of accountability and as fundamental to long-term profitability.
→ Increase resources dedicated to engagement
In the UK, following the introduction of the second version of the Stewardship Code, an FRC survey revealed that over half of responding asset managers had increased their resources, with more than 43% doing so "significantly."
→ Streer investments
Engagement practices highlighted in reporting reflect the most involved actors and can transform complex, abstract investment strategies into accessible storytelling that resonates with stakeholder and public concerns.
→ Expand responsible practices beyond regulation
For example, one of Japan's largest pension funds, the Government Pension Investment Fund (GPIF), now requires its asset managers to be signatories to the Japanese Stewardship Code.
→ Position Europe as a prime engagement hub
As the pioneer of the Code, the UK has made stewardship a key element of its reputation. By granting it a privileged position, Europe would strengthen its leadership on sustainability issues.
While the material impact of a Stewardship Code on the behaviour of institutional investors and asset managers remains hard to prove, WeeFin continues to advocate for greater investor accountability through the introduction, among other, of a European Stewardship Code.
WeeFin’s engagement module positions itself as an essential tool for asset management companies looking to prioritize engagement at the core of their sustainability strategy. With features focused on simplicity, synergies, and impact, it allows companies to use shareholder engagement as a true tool of influence.
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