Our May newsletter – System Stewardship in Bloom – highlighted how investors and others are embracing portfolio-wide responsibility: recognizing that undiversifiable risks threaten entire portfolios, and that long-term returns depend on the health of the economic, environmental, and social systems we all share.
In today’s post, we share more examples of that evolution unfolding across the investment landscape in the form of two new reports that illustrate how system stewardship is being applied to urgent challenges:
Majority Action’s Report on Artificial Intelligence
A new report by Majority Action, Emerging Technologies, Evolving Responsibilities: Why Investors Must Act to Mitigate AI’s System-Level Impacts, highlights the systems-level risks posed by certain uses of AI and flags system stewardship-aligned strategies investors can take to tackle the issue.
Majority Action’s report highlights how unchecked AI growth creates system-level risks – fueling carbon emissions, deepening inequality, and undermining democracy – that diversified investors cannot escape. It argues that policy and regulatory levers have been captured, leaving investors as one of the “last lines of defense” to ensure that AI development and deployment is undertaken in a manner that aligns with overall health of markets, communities, and democracy to protect long-term returns. It calls on diversified investors to adopt AI guardrails and use their capital and stewardship power to curb harmful corporate practices. By spotlighting not just public equity voting and engagement (the most common tactics for system stewardship), but also debt-financing pressure and limited partner actions at venture capital and private equity funds, the report reminds readers of the breadth of opportunity that asset owners have to influence real economy outcomes.
ShareAction Report on Universal Ownership
A second new report, Universal Ownership – a guide for charity and university asset owners, comes from UK-based ShareAction. The report was written on behalf of two networks—one of charities and the other of universities—organized by ShareAction. It shows how investors can protect portfolio returns by guarding the systems upon which we all rely.
The report applies to “universal owners” (long-term investors, or those who are sufficiently diversified that they own a significant share of the market for whom it is likely that their overall returns will be influenced more by the success of the overall market than by the value of individual stocks) and addresses tools such as sector-wide guardrails, denying primary financing to harmful activities, and using stewardship, policy advocacy, and manager mandates to curb negative externalities.
The guide is practical: it outlines capital-allocation levers, evaluation metrics tied to real-world outcomes, and case studies (e.g., climate, antimicrobial resistance, wages) that show how mission-driven investors can align investment influence with the health of people, planet, and the economy.
In a persuasive summary of the investment benefit of thinking holistically, the report explains:
For universal owners, therefore, risk is not just considered at an asset level, but also in terms of the risks to wider financial and economic stability. While Modern Portfolio Theory always assumes a risk-free investment opportunity is available, universal owners recognise that investors are unlikely to be able to ‘stock pick’ their way out of large-scale economic turbulence – and the emphasis should therefore be on reducing these wider economic risks. Investors should be ‘fighting climate change not just managing climate risk.’
In practice, this may mean acting to reduce the negative externalities generated by portfolio companies which contribute to systemic risk, even if this would reduce the value of the company – as doing so would protect the value of the portfolio at large over the longer term.
