Systemic Stewardship - The Missing Link in the Path to Net Zero
Marian D’Auria, IWF UK Member, Chief Sustainability Officer M&G plc
Five years in the steel business, in the middle of a career largely shaped by financial services, transformed the way I think about sustainability. It was there that I learned one of the most important lessons of the transition economy: systemic stewardship.
If the term is unfamiliar, the steel industry provides a useful illustration.
The reality is that, if carbon dioxide were harmless, nobody would abandon blast furnaces. They remain one of the most efficient and versatile ways of producing steel. Companies have invested heavily in them over decades. Supply chains, infrastructure and workforce skills have evolved around them.
That is why, despite ambitious pledges, available technologies and growing pressure to decarbonise, the global shift to low-carbon steel has been slower than many expected. Progress has been made, but emissions from steel production are not falling at the scale required.
The reason is simple: for many producers, decarbonisation is not yet an attractive economic proposition.
Replacing production processes requires enormous capital investment. Access to reliable, low-cost renewable electricity is often limited. Customers frequently show little willingness to pay more for lower-carbon products. In many markets, standards for "green steel" remain immature.
In effect, companies are being asked to spend substantial sums to transform operations and supply chains while producing much the same product for much the same customers at much the same price.
Steel is not unique. Similar challenges exist in cement, aluminium, shipping and aviation, industries that are responsible for a significant share of global emissions but face some of the toughest barriers to decarbonisation.
This is where systemic stewardship becomes important.
Traditional engagement typically focuses on changing the behaviour of individual companies. Systemic stewardship recognises that some challenges cannot be solved by individual companies because the barriers are embedded within the wider system.
To unlock decarbonisation in hard-to-abate sectors, we need:
functioning markets for lower-carbon products
procurement frameworks that reward cleaner production
electricity pricing that supports industrial electrification (they will need access to vast quantities of reliable, renewable electricity) and
financing mechanisms capable of supporting industrial transformation
None of these can be delivered by a single company acting alone. Instead, we require coordinated action from policymakers, regulators, industry, financial institutions and investors.
Whilst that might seem an ambitious ask, we have seen this before. The dramatic reduction in the cost of renewable energy did not happen solely because companies decided it should. It was the result of policy support, investment, innovation and market creation working together.
The same approach is now needed for industrial decarbonisation.
For asset owners and investors, the implication is clear. Stewardship should not be confined to engagement with individual companies. It requires engagement with the system itself. That means supporting effective public policy, participating in industry collaborations and helping to create the conditions in which sustainable outcomes become commercially viable.
Ultimately, the transition to a low-carbon economy will be policy-led, but it will need engagement across the industrial and financial sectors. Every organisation has a role in helping shape or advocate for the environment in which progress becomes possible.
Without solutions for hard-to-abate sectors, there is no credible pathway to net zero. Systemic stewardship is therefore not a niche sustainability concept. It is a core responsibility for boards seeking to protect long-term value, economic resilience and the stability of the societies in which they operate.
