Meeting the stewardship goals of universal owners

Fast reading

Stewardship needs to extend beyond engagement with companies to include policy and market best practice engagement.
2026 will mark a material shift towards addressing systemic issues in alignment with investors’ long-term financial interests.

In 2026, investor stewardship will need to increasingly focus on systemic economic risks and opportunities alongside the financial performance of individual investments. Universal owners are widely invested in the economy, with long-term investment horizons, so absolute returns matter. Indeed, it’s arguable that the performance of the benchmark can be of greater value than relative returns.

With this in mind, we believe that stewardship needs to extend beyond engagement with companies to include policy and market best practice engagement, to help address systemic risks. When carried out effectively, this will provide the policy and industry environment in which companies can grasp the opportunities that new market trends afford. This will help to preserve long-term value for our clients, and their beneficiaries.

Three trends for 2026

Three trends are currently dominating the global economic landscape: artificial intelligence (AI), the climate transition, and geopolitics. Each requires a distinct approach, recognising what it is feasible to achieve through engagement.

Geopolitics – Whilst investors can and should engage with companies on their supply chain resilience, target markets and operational risk, influencing international political outcomes at a policy level is outside the remit of investor stewardship. The focus should be on mitigating individual investment risk without pursuing political agendas.
Climate transition – Investors can engage with governments, regulators and standard setters to encourage measures that will facilitate profitable investments in the transition by companies, whilst benefitting the end consumer through energy security and affordability. Time-bound policies focused on infrastructure development, blended finance, sector-specific subsidies, workforce retraining, and carbon pricing could all provide companies with the impetus to take investment risk. Once renewable solutions are established, market forces will sustain profitable growth. Investors can also encourage companies to collaborate across sectors on the development of best practices.
Artificial intelligence – The adoption of AI is accelerating, which will make some industries obsolete and transform others. AI will reshape jobs and the customer experience, while raising societal concerns around data privacy and consumer rights. Investors will benefit from engaging with policymakers and sector associations as well as companies, to develop economic models that safeguard consumer, employee and citizen rights as industries rapidly evolve.

Looking ahead, policy and market best practice engagement should become a critical lever for enhancing portfolio returns. Complementing company engagement, which will remain central, 2026 will mark a material shift towards addressing systemic issues in alignment with investors’ long-term financial interests. Stewardship will evolve to become more strategic, helping to shape the frameworks within which companies and economies can thrive.

Working closely with our clients, EOS at Federated Hermes Limited has embarked on three initiatives to enhance its stewardship service and its delivery for clients. These are: a focus on stewardship outcomes at companies; the financial materiality of company engagement; and policy and market best practice engagement objectives and activity.