Introduction

The financial sector plays a key role in addressing systemic challenges, including climate change, social inequalities, and biodiversity loss. However, current investment practices often fail to deploy capital responsibly, contributing to environmental and social harm. ShareAction’s Responsible Investment Standards & Expectations (RISE) initiative aims to standardise responsible investment by ensuring that asset managers integrate these risks into decision-making alongside financial returns.

Engagement with companies is a critical responsibility of investors, yet without clear escalation measures, it can lack impact. Many asset managers reference escalation in their policies, but disclosures on how these tools are applied remain vague. Strengthening engagement through a structured escalation framework will improve accountability and transparency, ensuring that companies respond to investor concerns.

The escalation framework

The escalation framework consists of a structured pathway and a toolkit of escalating actions designed to strengthen investor influence. The escalation toolkit categorises tools into five levels of increasing intensity, applicable to both corporate debt and listed equity. The stages are:

• Private persuasion – Initial private engagement with senior management to express concerns.
• Broader challenge – Public statements, collaborative investor action, and media engagement.
• From talk to action – Shareholder voting, filing resolutions, and rejecting management proposals.
• Capital allocation decisions – Reducing exposure, excluding companies from ESG-labelled funds, or declining participation in new issuances.
• Levers of last resort – Full divestment, either privately communicated or publicly disclosed.

The escalation pathway defines the structured timeline for applying these tools, ensuring that asset managers act predictably and consistently. This approach improves transparency for asset owners and allows companies to anticipate the consequences of failing to meet investor expectations.

Considerations in implementation

To maximise effectiveness, the escalation framework must be implemented with key considerations in mind:

• Collaborative engagement – Investors working together amplify their influence. Although competition laws have been cited as barriers, regulators in the UK and EU have clarified that collective action on sustainability is permitted.
• Regional variations – Different markets have varying regulatory landscapes, requiring flexibility in how escalation tools are applied.
• Fixed income engagement – Bondholders can leverage their influence, particularly during new debt issuances, by setting clear expectations and withholding participation when necessary.
• Passive asset managers – While passive funds cannot divest as actively as active managers, they can engage index providers, vote strategically, and offer ESG-aligned investment products to clients.
• Existing policies and guardrails – The escalation framework should complement asset managers’ existing engagement policies and sectoral expectations. In urgent cases, steps can be skipped to accelerate pressure on companies.

Asset managers must balance deep, resource-intensive engagement with broad sector-wide influence. They should prioritise key companies while supporting external escalation efforts that align with their investment principles.

Expectations in detail

Asset managers are expected to integrate escalation into their engagement strategies through structured disclosure and clear timelines:

• Policy disclosure – Publish a structured escalation policy that applies to both equity and debt holdings.
• Sectoral expectations – Define environmental and social milestones for key industries, ensuring that expectations align with global standards such as the Paris Agreement and the UN Sustainable Development Goals (SDGs).
• Escalation pace – Establish and disclose a timeline for progressing through escalation steps when companies fail to meet expectations.
• Reporting and transparency – Provide data on the number of companies escalated, actions taken, and the outcomes achieved. Reporting should be machine-readable and standardised for comparability.
• Resourcing and integration – Ensure stewardship teams are adequately resourced, have expertise in environmental and social risks, and are fully integrated into investment decision-making.

Conclusion

A structured and transparent escalation framework is necessary to improve investor engagement and corporate accountability on environmental and social issues. Current approaches lack consistency and transparency, limiting their effectiveness. By standardising escalation, asset managers can strengthen their influence, drive systemic change, and ensure companies meet responsible investment expectations. This framework offers a practical solution for improving stewardship practices, fostering greater ambition in corporate engagement, and enhancing accountability across the financial sector.