About capital stewardship
Workers have organized and bargained collectively to ensure entitlements to benefits and security throughout their working lives and into retirement. These deferred wages and savings – known as “workers’ capital” – are accumulated in collectively funded pools such as pension plans, strike funds and benefit plans. In Canada, workers’ capital represents approximately $2 trillion.
Workers’ capital is invested in markets across Canada and the world. This capital can be a tremendous source of power in building an economy that upholds workers’ rights and advances broader societal goals for a just and sustainable economy.
The trustees that sit on boards of pension funds and other capital pools have a fiduciary duty to act in the best interests of plan members. Legal research conducted by leading Canadian and global law firms, and supported by the United Nations-backed Principles for Responsible Investment, find that failure to consider environmental, social and governance (ESG) issues in the investment process is a failure of fiduciary duty. Capital stewardship is an important tool that trustees have at their disposal to address ESG issues in investments.
Capital stewardship refers to the rights and responsibilities that investors have as shareholders and owners of assets. Once an investment decision is made, investors can use their voices as shareholders to support corporate practices that protect human and labour rights. For example, investors engage companies through meetings, letters and collaborative efforts to push for improved corporate practices such as the disclosure of the proportion of a workforce that is contingent, policies to promote diversity on boards, better supply chain transparency and limits to executive compensation.
Capital stewardship also refers to how investors oversee and execute the voting rights attached to the shares that they hold in companies. Investors can vote for or against management and shareholder resolutions, which sends a strong signal to companies.
Capital stewardship can feature in alternative investments, such as infrastructure and real estate, where fewer funds often hold larger ownership stakes.