Why has stewardship become more important with rising passive investing?

Why has stewardship become more important with rising passive investing?

• A. Because asset managers have less influence
• B. Because index investing and sustainability investing converge, increasing asset managers' governance role
• C. Because there is no relation
• D. Because companies stop disclosing ESG data

Answer: (B)

Stewardship grows in importance because passive funds own large portions of many companies and still hold voting and engagement rights. As index investing rises and sustainability investing becomes more integrated with those indices, asset managers increasingly influence governance and long-term strategy. They’re not picking winners, but they are responsible for voting on major corporate decisions and pushing for ESG improvements that affect value over time. That combination makes the governance role of asset managers more central. The other ideas don’t fit as well: active influence doesn’t shrink with passive growth; there is a real link between passive ownership and how those funds exercise governance; and ESG disclosure isn’t disappearing—it's a key area managers engage with to protect long-term value.

Stewardship grows in importance because passive funds own large portions of many companies and still hold voting and engagement rights. As index investing rises and sustainability investing becomes more integrated with those indices, asset managers increasingly influence governance and long-term strategy. They’re not picking winners, but they are responsible for voting on major corporate decisions and pushing for ESG improvements that affect value over time. That combination makes the governance role of asset managers more central.

The other ideas don’t fit as well: active influence doesn’t shrink with passive growth; there is a real link between passive ownership and how those funds exercise governance; and ESG disclosure isn’t disappearing—it's a key area managers engage with to protect long-term value.