Royal London Asset Management’s Stewardship and Responsible Investment Report 2025 highlights the importance of stewardship in shaping real-world outcomes for pension funds. The report identifies five key themes that are driving stewardship outcomes for pension schemes.
These themes include climate transition, just transition, interconnectivity, governance and voting, and technology, AI and cyber risk. Each of these themes presents unique challenges and opportunities for pension funds to engage with companies and promote sustainable practices.
Climate Transition: Progress is Uneven
The report notes that climate change is now a core business risk, not just a sustainability issue. Royal London Asset Management’s Net Zero Stewardship Programme engaged with companies responsible for over half of their financed emissions, assessing their transition plans and progress.
While some companies have made progress in strengthening disclosure and near-term targets, overall progress remains mixed. Political uncertainty and policy volatility are influencing corporate decision-making, slowing alignment in some sectors.
Just Transition: Social Risks Can Derail Climate Pathways
The report highlights the importance of integrating just transition into climate engagement. This involves considering the impact of climate transition on workers, communities, and customers.
Royal London Asset Management engaged with UK banks to examine how their lending, product design, and regional strategies support a fair transition. Progress was strongest in sustainable finance and product innovation, but place-based and community impacts remain underdeveloped.
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The report also notes that climate transitions that overlook social impacts risk political backlash, regulatory intervention, and operational disruption.
Interconnectivity: Climate, Nature, and People are Converging
The report identifies a shift towards holistic, interconnected thinking in stewardship. This involves recognizing the links between climate, nature, and people.
Royal London Asset Management deepened its work on the climate-nature nexus, biodiversity, and just adaptation, engaging with companies exposed to physical climate risks, land use, and supply-chain disruption.
The report notes that systemic risks do not stay contained within asset classes or sectors, and that stewardship that recognizes interconnections is essential for long-term portfolio resilience.
One key takeaway from the report is that stewardship outcomes matter more than activity metrics.
Governance and Voting: Escalation is Becoming the Norm
The report notes that voting is no longer a backstop, but an active escalation tool. Royal London Asset Management voted at over 4,000 meetings globally and escalated on issues including climate oversight, executive pay, board accountability, and workplace culture.
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The report also highlights the importance of governance in protecting long-term value. Governance failures often precede financial underperformance, and stewardship that links engagement and voting is critical for protecting long-term value.
Technology, AI and Cyber Risk: Stewardship is Catching Up with Reality
The report notes that rapid advances in AI, digitalisation, and data infrastructure are reshaping corporate risk profiles. Royal London Asset Management expanded its engagement on sustainable and ethical AI and cyber resilience.
The report highlights the importance of board expertise, incentive structures, and transparency on system resilience and resource use. Technology risks are now systemic, and weak oversight can lead to abrupt value destruction, regulatory costs, and reputational harm.
For pension investors, the report provides several key conclusions. Stewardship outcomes matter more than activity metrics, and social and governance risks are now financially material transition risks.
Collaborative engagement can move markets, but only with clear expectations. Voting remains a critical escalation lever, and long-term value demands holistic, interconnected thinking.
Ultimately, stewardship is no longer optional for pension investors. It is a fundamental tool for protecting and enhancing long-term outcomes. By engaging with companies, voting, and advocating for sustainable practices, pension schemes can promote a more sustainable future.
