Strengthening Stewardship: IIGCC Urges Creation of EU-wide Code
August 7, 2025
The Institutional Investors Group on Climate Change (IIGCC) has called for a new EU-wide stewardship code to be created to enhance coherence and reduce fragmentation between member states and internationally.
The establishment of an EU stewardship code was one of five key recommendations set out in a position paper published last week by the group, which counts more than 400 asset owners and asset managers as members.
The IIGCC’s position paper suggested the creation of a voluntary, principles-based EU stewardship code, supported by targeted regulatory reforms. This code could help harmonise expectations and reduce reporting burdens, heighten transparency and enable effective engagement across asset classes and the EU’s 27 member states.
The document highlighted that investor stewardship can play a critical role in fostering sustainable long-term value creation and encouraging behavioural change to support the transition efforts of investee companies in line with the EU’s net zero commitments.
However, the initiative stressed that to achieve this investors require a “coherent, EU-level approach to stewardship that transcends national boundaries”, which an EU-wide stewardship code would offer.
“Investor stewardship and engagement play an important role in supporting the EU’s transition to net zero,” Laith Cahill, Head of Stewardship Research at the IIGCC, told Minerva Analytics. “Our recent position paper was prompted by the need to harmonise stewardship practices across member states and the opportunity to unlock the full potential of investor engagement in driving both the net zero transition and the EU’s competitiveness objectives.”
IIGCC’s paper stated that an EU-wide stewardship code could serve as a “distinctive normative framework that will complement, rather than substitute” regulation, with a well-designed code offering an opportunity to interpret and operationalise the provisions of the Shareholder Rights Directive (SRD) II.
IIGCC spotlighted four key advantages of introducing an EU stewardship code: clarifying stewardship expectations; enhancing regulatory disclosures; incentivising active engagement; and increasing comparability to facilitate understanding and decision-making.
The IIGCC acknowledged that stewardship is already recognised as an important lever by policymakers for advancing sustainable finance in the EU. However, stewardship and engagement practices being governed at the member state-level creates divergences in regulatory transposition, interpretation, voting rights, shareholder resolution procedures and AGM timelines, creating complexity and inefficiency.
There is also fragmentation in the existing stewardship codes of member states, with some possessing “robust” stewardship codes, others relying on voluntary frameworks, and many lacking any principles in this area at all.
The paper stated that an EU-wide stewardship code should leverage existing frameworks and identify equivalencies. It suggested that a mapping exercise could be conducted to assess alignment between the EU code and national or international codes, as well as identifying what further requirements would be expected.
“Identifying where successful reporting against a principle in one code would automatically result in successful reporting under the EU code would simplify the process for investors, reduce redundancies and support consistency across different regulatory environments,” the paper read.
“It is essential that a new EU stewardship code builds on existing frameworks, both in Europe and internationally, to prevent further fragmentation and reduce the overall reporting burden,” said Cahill. “IIGCC also recommends that the code be supported by targeted regulatory reforms that provide clarity on engagement, escalation and sustainability integration.”
Without alignment with existing standards, the position paper warned that the introduction of a new code risks “adding unnecessary complexity and administrative burden, undermining its intended benefits”.
The IIGGC added that the EU has a “second-mover advantage”, and can build on frameworks from the UK, Japan, its member states and the European Fund and Asset Management Association to develop a code that is “practical, effective, and proportionate”.
“We believe that a coherent EU-wide approach will empower investors to engage more effectively across asset classes and jurisdictions, enabling them to better support long-term value creation aligned with net zero goals,” added Cahill. “IIGCC’s recommendations are designed to ensure investors are equipped to play a central role in Europe’s net zero transition.”
Alongside the creation of an EU-wide stewardship code, the report made four other key recommendations. This included two focused on alignment: aligning and integrating voluntary initiatives with regulatory frameworks to facilitate stewardship; and conducting a “coordinated review” of the SRD II and the Sustainable Finance Disclosure Regulation to align stewardship-related disclosures.
Similarly to the implementation of a stewardship code for all EU member states, this would help reduce regulatory fragmentation.
Another recommendation was to “safeguard the availability of meaningful data” under the EU Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards to “support informed shareholder engagement and voting”.
Investors have long awaited an increase in sustainability data from the CSRD, which would support their stewardship efforts. However, both the CSRD and the Corporate Sustainability Due Diligence Directive look set to have their scope significantly reduced by the European Commission’s first omnibus package, as reported by Minerva Analytics. This looks likely to prove detrimental to investors, drastically decreasing the new data revealed through company disclosures.
The final recommendation of the IIGCC’s paper was to protect investor rights across asset classes. This included improving AGM practices and voting mechanisms to “ensure shareholders can effectively exercise their rights and influence corporate behaviour”, while extending stewardship regulation across “appropriate asset classes”.
The group highlighted both the shift to virtual-only AGMs and increase in dual-class share structures (DCSS) as issues facing investor rights in the EU.
The paper noted that AGMs are “critical for shareholder oversight”, with the shift to virtual and hybrid AGMs presenting “both opportunities and risks”. Hybrid AGMs, offering both in-person and virtual attendance, offer advantages including reducing costs, improving efficiency and including a broader range of participants, as reported by Minerva Analytics.
Virtual-only AGMs, however, have significant drawbacks including restricted access to meetings, limited opportunities to pose questions to senior company figures, and a reduced opportunity for discussion with the firm over important topics. Some have suggested that companies are looking to adopt virtual-only meetings to avoid accountability from issues highlighted by investors.
To combat this, the IIGCC recommends the establishment of EU-wide guidelines for AGM formats, ensuring hybrid options and minimum standards for virtual participation.
The paper also stressed the importance of the principle One Share, One Vote principle in underpinning “fair and effective” stewardship. “The rise of dual-class shares with differential voting rights threatens to dilute shareholder influence and long-term engagement,” the IIGCC warned.
DCSS creates separate classes of shares with different voting powers, widely referred to as Class A and Class B shares. These separate shares often give founders and senior figures at companies greater control and restrict the influence that shareholders can have.
IIGCC’s position paper recommended establishing a maximum voting ratio to limit the disparity between different classes of shares and introducing sunset clauses that phase out differential voting rights after a certain period to ensure that all shareholders eventually have equal voting power.
As reported by Minerva Analytics, both UK FinTech Wise and US tech firm The Trade Desk have looked to extend the sunset periods for their DCSS as part of bundled management proposals in recent weeks.
This could suggest a beginning of a trend where companies target an extension of their DCSS using a bundled proposal which shareholders are less likely to vote against than a specific proposal solely to push back the sunset period for the structure.
IIGCC also recommended prohibiting multiple voting rights for critical AGM items, such as votes on executive remuneration and related-party transactions, to “maintain fair and balanced decision-making”.
“Another area where greater harmonisation across markets could be beneficial is on shareholder proposals in terms of rules around what ownership is needed to file resolutions, how many days’ notice is required,” said Thomas Bolger, Senior Stewardship Analyst at Minerva Analytics.
“Overall, harmonisation across the EU would likely be a good thing if implemented well and strengthen stewardship practices,” he added.
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Last Updated: 7 August 2025