Building a New Culture

In our last newsletter of 2025, we noted that system stewardship was maturing and that body of relevant work was expanding accordingly. One of the most encouraging signs of this maturation is that new publications about system stewardship are increasingly coming from investors themselves. These publications often explain both why managing systems is critical to an institution’s investment thesis and how these investors are going about it.

This kind of work is neither self-aggrandizement nor virtue signaling. Rather, it reflects a commitment to stewardship and a recognition that changing industry norms is a crucial to the success of system level investing. As the Zurich-based advisor Rezonanz says in the recently-published The Stewardship Field Guide:

Without visible positioning, even strong stew­ardship actions remain isolated. Silence cedes narra­tive ground to actors with less credible intent or lower ambition.

• Public signaling turns stewardship from a series of private transactions into a form of field-level influ­ence.
• It shifts norms not just through pressure, but through visibility: showing what’s possible, what’s expected, and what credible stewardship looks like.

That insight is critical: lone system-level investors cannot succeed individually. Unlike traditional alpha-centered investing, where investors can successfully pursue individualized strategies designed to beat (or track) the market, system-level investing cannot succeed isolated from the strategies of other investors. Indeed, a single investor focusing on the systemic impacts of its investing practices would neither protect systems nor optimize its own returns. To be successful, system-level investing (including system stewardship) must be a movement that changes the financial industry.

The need for a different culture remains acute. Despite the many green shoots of system-level investing, the necessary broad changes have not occurred: industry incentives and deep norms still coalesce around celebrating and rewarding positive alpha (or avoidance of tracking error) rather than working to increase the overall return of the market (beta) through systems thinking. As long as this remains true, system stewardship will not fulfill its promise—capital will continue to flow to uses and business practices that maximize relative return at the level of individual companies and specific portfolios, even when those practices threaten the systems that undergird the economy.

A familiar example illustrates this dynamic. Payment of a living wage across the economy would raise global productivity and thus strengthen the long-term financial returns of diversified investors, but current norms reward investment managers for choosing companies that expand margins and increase share prices by paying lower wages. The norms lead everyone to invest in a manner that lowers returns across the board. As we have explained elsewhere, this is the prisoner’s dilemma that system stewards must solve: investors are acting rationally to maximize alpha, yet everyone is ending up with lower absolute returns.

System-level investing will fulfill its promise only when the number of investors practicing it is sufficient to change capital flows. That will require a critical mass of investors insisting that managers and other service providers prioritize beta, so that career success and winning mandates cannot be achieved through alpha that comes from extracting value from critical systems.

That is why the first job of system stewardship must be building the field.

Two recent publications are fulfilling this role. One recent field-building tool comes from AP7, the default fund for Sweden’s national defined contribution plan, which manages more than USD150 billion in assets. Another comes from Rezonanz, in the form of the above-cited Stewardship Field Guide.

The AP7 report, Universal Ownership: Systems thinking for Asset Owners, is clear and concise, and provides practical advice for incorporating system stewardship into an institution’s practices. It starts with a clear statement of how the potential for company externalities necessitates investor vigilance because diversified investors have systemic interests that diverge from those of the companies they own:

The focus on externalities means that universal owners [i.e., institutions with diversified portfolios and long-term liabilities] may at times have different interests than company management. This is in stark contrast to traditional financial thinking where an investor could think favorably of a company that profits from shifting part of its production cost in the form of negative externalities to other companies or society at large.

From there, the report recommends a systemic stewardship strategy with three interconnected components: “[p]olicy advocacy, standard setting, and sector-wide or value-chain engagement.” It also describes six tools for achieving those components:

• Collaborative stewardship
• Director votes
• Expectation documents
• Pre-declaration of voting intentions
• Asset management engagement
• Bondholder engagement

The report includes a one-page explanation of each of these tools, several case studies, and a very well-curated reading section.

Rezonanz’s Field Guide is a very different sort of publication. Rather than focusing on systems, it provides an overview of stewardship approaches and practical advice for investors across a range of priorities. Its utility for system stewardship lies in the fact that it distinguishes types of stewardship and in its emphasis on what techniques are important for investors focused on systems:

Systemic stewardship requires public signaling, shared tools, and engagement with policy makers. These efforts amplify investor impact beyond individ­ual issuers.

The Guide goes on to list types of signaling, including “[v]oting redlines or guardrails” and “[m]edia engagement or direct-to-company open letters.” In addition, the Guide includes useful sections on building and funding stewardship structures and engaging policymakers. It also addresses key barriers, including fear of retaliation, scrutiny, and free-riding.

We will continue to feature recent field-building publications as space allows. For investors beginning—or deepening—their system stewardship journey, these two are an excellent start.