If your situation prevents you from mechanically connecting the shield on the 'preferred' end, the encoder is designed to allow you to still connect at the encoder end. It ensures there is at least one end with the shield earthed.
For example, the cabinet on the receiving end may be too small, may be non-conductive, may have gland requirements that prevent the shield connection (explosion proof), or may simply have no remaining provisions to connect the shield. So a well-designed field device will allow you to make that shield connection at the field connection.