For years, institutional investors have said the same thing: culture matters.
It appears in due-diligence meetings, trustee papers, stewardship reports and post-mortems of failure. Culture is routinely cited as a factor in governance breakdowns, risk failures and reputational damage.
And yet, despite this near-universal consensus, culture remains one of the least well-evidenced and least governable inputs in institutional decision-making.
That tension is becoming increasingly difficult to sustain.
A gap between belief and practice
In most institutional settings, culture is assessed qualitatively. Consultants and asset owners speak to senior teams, observe behaviours, review policies and apply professional judgement. These assessments are often thoughtful and well-intentioned – but they are also subjective, inconsistent and hard to compare across organisations.
When challenged, culture is typically defended narratively rather than evidentially. Trustees are asked to rely on the credibility and experience of advisers. Regulators and stakeholders are given descriptions rather than documentation.
That approach made sense when scrutiny was lower and decision-making was less exposed. It makes far less sense today.
Why the pressure is rising
Three structural changes are forcing culture into sharper focus.
“The institutional market lacks a defensible way to evidence its beliefs about culture consistently“
Bev Shah is co-CEO at City Hive
First, non-financial risk is no longer peripheral. Governance, conduct and organisational resilience are now explicitly recognised as material to long-term outcomes. Culture sits at the heart of all three.
Second, fiduciary accountability has intensified. Trustees, advisers and fiduciary managers increasingly need to demonstrate not just what decisions were made, but how and why they were reached. Hindsight scrutiny is now an accepted feature of the institutional landscape.
Third, delegation has expanded. As more schemes move into fiduciary and OCIO models, responsibility is concentrated. When something goes wrong, explanations need to be robust and defensible.
Against that backdrop, relying on informal, narrative-led assessments of culture looks less like professional judgement and more like an unaddressed governance gap.
Culture failures are rarely sudden
One of the uncomfortable truths for institutional investors is that culture failures rarely arrive without warning. They tend to manifest gradually – through increased risk-taking, internal friction, turnover of key staff, breakdowns in challenge or erosion of accountability.
Performance deterioration often comes later.
The problem is not that institutions ignore culture; it is that they lack a consistent way to monitor change over time. Culture is discussed episodically, not systematically. Signals are often anecdotal and dispersed. By the time concerns crystallise, damage has usually been done.
In an environment where early warning and risk management are prized, this is a clear weakness.
Why existing approaches struggle to scale
Consultants and asset owners are not failing in their duties – they are constrained by structure.
Consultants cannot credibly be both assessors and standard-setters. Their judgements carry weight precisely because they are professional opinions, not formal certifications. Attempting to standardise culture internally risks inconsistency, liability and loss of credibility.
Asset owners, even very sophisticated ones, face a different constraint: capacity. Assessing and monitoring culture across dozens or hundreds of external organisations, consistently and continuously, is resource-intensive. Most teams simply cannot do it at scale.
The result is a reliance on informal judgment where something more robust is increasingly required.
The standardisation moment
Institutional markets have been here before.
Environmental, social and governance considerations were once handled informally, through narrative and belief. Over time, as scrutiny increased, frameworks emerged. Reporting became more structured. Documentation improved. ESG did not replace judgment – it professionalised it.
Stewardship followed a similar path. Risk management frameworks, too, evolved from art to discipline.
Culture now appears to be reaching the same inflection point.
This does not mean turning culture into a box-ticking exercise, nor does it mean replacing professional judgement with scores or rankings. It means recognising that evidence and comparability matter, even in qualitative domains.
Culture as a governable risk
Treating culture as a governable input requires three things: independence, consistency and auditability.
Independence matters because culture assessment is sensitive and subjective. Consistency matters because comparison across organisations is otherwise meaningless. Auditability matters because fiduciary decisions increasingly need to stand up to scrutiny long after they are made.
Crucially, this does not mean removing judgment from the process. It means strengthening the inputs that judgment relies on.
In practice, this looks less like a new opinion and more like new infrastructure: a way of evidencing culture that can sit beneath existing research, governance and oversight processes without disrupting them.
An inevitable evolution
The institutional investment market is not short of beliefs about culture. What it lacks is a defensible way to evidence those beliefs consistently.
As governance expectations rise and scrutiny intensifies, that gap becomes harder to ignore. Culture is now too important to leave informal – and too sensitive to leave subjective.
The question for institutions is no longer whether culture should be considered. That debate is settled.
The question is whether the way it is currently handled is adequate for the environment they now operate in.
History suggests it is not – and that standardisation, carefully and thoughtfully applied, is the next step.
Bev Shah is co-CEO at City Hive
