Football supporters are familiar with the extractive mentality—owners who take over a club by saddling it with debt, and owners who mortgage the very stadium they play in to raise money. Danny Hunter is different. He represents the stewardship mindset.

Hunter is chairman of Boreham Wood Football Club, which lies outside the top four professional tiers of English football. On 5 February 2022 they played away in the FA Cup against Bournemouth, a club from the second tier 135 places above them. They won 1-0, earning themselves an away tie (this week) at top-tier Everton.

Hunter explained why he had re-mortgaged his house during the pandemic to secure the club’s survival:

“None of us had been through a pandemic. I’ve got the most amazing set of players and staff. They’d been very loyal to me. While everything needed to sort itself out… I needed to ensure that my staff and players were safe, and we could look after them and that’s what we did. And perhaps God loves a trier and he’s rewarded us with the FA Cup run….

“I’ve become the longest serving chairman in the last two weeks. ….Yes, I do believe owning or looking after your local club, there is a duty of care. It is almost like public service. …It’s the greatest honour of my life to be able to look after this club,” he said.

His example challenges all of us who have responsibilities for an organisation, whether as owner, shareholder, trustee, director or manager. These assets and relationships have been entrusted to us. How do we ensure that we pass them on in better condition?

Company stewardship and impact

As a saver or investor I would like to know that the companies into which my savings are flowing are marked by stewardship. That applies both to the asset managers who look after my portfolio and companies in which they invest my capital.

Some private equity firms which have become owners of care homes, using sale and leaseback to unlock easy money and earn a fast return while burdening the homes with debt. I would like to be confident that my savings are not being invested in that kind of private equity. And, if they are, I would at least expect the portfolio managers who are looking after my funds to use their influence to put a stop to this extractive approach.

At this point people may ask, “Are we referring to ESG funds?” No, we are not. The appetite for ESG is healthy, but the more popular it becomes the more it is misunderstood. Wealth is created by individual companies. The impact of these companies depends on their character. ESG assessments are based on what the company reports on externally defined criteria and there is always a temptation to “game the system”. They cannot factor in the character of a company.

Stewardship starts with the character of the company. At its core is the idea that a business is conducted to meet human and social needs and should be judged by the total value it is contributing of which financial value is but one part. The money being invested by pension funds, insurance companies, retail investors and others has, in large part, flowed from the savings of citizens.

Most citizens want a financial return that is achieved responsibly by companies with a stewardship mindset—companies that they could imagine their daughters or granddaughters working in. And governments offer the investment industry a licence to operate on the expectation that responsibility and sustainability are at the heart of investment.

A sense of purpose

A steward not only cares about creating value, but doing it responsibly, with a sense of purpose. As we put it in our book Entrusted: “Stewardship treads where generalised criteria of responsible business and investment dare not. ESG is looking from the outside in. Stewardship is looking from the inside out. ESG reaches its limit where stewardship really starts.”

So, responding to the growing scepticism about ESG and its vagueness, Imagine a test which would enable an investment institution to look at its portfolio and to assess each company on the strength of its stewardship. Criteria would include:

• Purpose, values, ethical standards and how well the company’s governance upholds them
• Business model and its societal impacts
• Assessments of relationships with
  —employees
  —customers
  —suppliers
  —community
  —shareholders
•  Time horizon and attitude to future generations
• How true are the company’s systems of recruitment, recognition discipline and reward to its purpose and values.

Stewardship can be stimulated by regulation but it needs to become embedded in markets. A stewardship mindset is increasingly reflected in the stewardship codes of the UK’s Financial Reporting Council, as well as in many other countries. The real breakthrough will have come when, in the wake of disillusionment with ESG, a growing number of clients demand and/or respond to offers of stewardship investment products.

There are plenty of incentives for the asset management industry to be competitive in the pursuit of financial returns. What we now need is to create incentives for its members to compete to be recognised as excellent stewards, confident in the evidence which we can offer that a focus on stewardship is associated with companies that endure to add value to society.

This will not be an easy journey, but, as that stewardship exemplar Danny Hunter puts it, “God loves a trier”.

Ong Boon Hwee is the former CEO of Stewardship Asia, and Mark Goyder is the founder ofTomorrow’s Company. They are the authors of Entrusted: Stewardship for Responsible Wealth Creation.