n a recent episode of Behind the Ticker, Emma Harper, a research analyst at Sage Advisory, shared insights from the firm’s 2024 ETF Stewardship Report, which evaluates how ETF providers engage with companies, vote on shareholder proposals, and integrate sustainability and governance practices. With a background in finance and research, Harper plays a key role in Sage's analysis of responsible investment strategies, ensuring the firm’s investment decisions align with best stewardship practices. Sage Advisory, which manages approximately $28 billion in assets, focuses on institutional and retail clients, blending investment management with rigorous research.

Harper explained that Sage’s annual stewardship report examines ETF providers' voting and engagement practices, governance structures, and transparency efforts. The report analyzes how asset managers influence corporate behavior through proxy voting, engagement strategies, and sustainability considerations. One key aspect of the research is assessing whether providers have dedicated stewardship teams and clearly defined voting policies. Given that ETF holders delegate their ownership rights to fund issuers, understanding how these rights are exercised is crucial for fiduciary responsibility.

A major trend identified in the 2024 report is a decline in transparency among ETF providers, particularly in response to regulatory scrutiny and political pressures. Harper noted that while early versions of the report saw growing disclosures from asset managers, recent years have shown a more cautious, legalistic approach to describing stewardship activities. Additionally, there is a widening divide between active and passive ETF managers, with active managers generally exhibiting stronger stewardship practices. Passive managers, on the other hand, tend to rely more on third-party proxy advisors and have less direct engagement with portfolio companies.

Harper also highlighted concerns about the concentration of voting power among a few major ETF providers, such as BlackRock, Vanguard, and State Street. These firms control trillions of dollars in assets and exercise substantial influence over corporate governance. The report found that larger providers tend to support management more often than smaller firms, which raises questions about their commitment to shareholder advocacy. Harper emphasized that investors should carefully evaluate ETF issuers’ stewardship policies, particularly as issues like ESG, artificial intelligence, and cybersecurity become more relevant in corporate decision-making.