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.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Emma Harper covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
And so if you know ETF providers don't exercise their stewardship responsibilities diligently we think there's a risk in harming long term value and exacerbating broader market risks like corporate governance failures or. And it grants to other researchers like really risks and from our data. Actually the larger managers are far more likely to support management than vote against management and through self reported stats we found that large managers on average reported supporting management about 91% of the time versus media managers or small managers the groups that we have reporting more 81 82% of the time.
And so they have products that are catering to those investors looking for ETFs that align with their particular priorities. But overall as fiduciaries they have to prioritize the long-term financial interest of their clients. I would agree with that. Engagement with portfolio companies I think is probably one of the key elements of stewardship. What differences do you notice in engagement strategies among different ETF providers and even by size.
Market Context and Positioning
So I would say you can try to do some on ETF providers very right some don't even engage right so we're talking about that passive group where they just. They just don't engage at all that's not part of their strategy that's not something they do so that's one group. And and then you have another group that are really focused on engaging really have a focus on topic talking with company management. Having metrics and targets for success for their conversations.
And I have been focused on research and sage. So all things research on things like ETFs I were chatting about today to responsible investment, sustainable strategies. So it's been really interesting to see kind of the growth of all these different areas and be able to learn about all these different ETF providers. And there are their stewardship practices is going to be focused for us and what we're chatting about today. So it's been it's been a journey and it's been great to learn.
So before we get started, I want to give everybody a little bit about your background and how you eventually ended up over at Sage Advisory. Sure, so I went back to school after having career in actually a different world. It was more retail management. And I decided to go back to school because I loved the financial aspects of the business and everything. And so I went and bought my MBA and focused in finance and then wound funding a job with a few.
Notable Insights
"There actually might be a difference in stewardship practices and what we found was actually a pretty good gap in stewardship practices between those that were more."
"Right, we wanted we wanted want to make sure we understand what's happened in practices with that as well as overall so that's why we we focus on both and you know overall search practices as well as ENS practices to understand."
Key Takeaways
- 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.
- One key aspect of the research is assessing whether providers have dedicated stewardship teams and clearly defined voting policies.
- The conversation explores important themes in active management relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Emma Harper highlights important considerations around active management. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of active management and esg & thematic discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Emma Harper, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.