UK Stewardship Code
The UK Stewardship Code 2020 took effect on 1 January 2020 and sets high expectations of those investing money on behalf of UK savers and pensioners. It defines stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
The Code focuses on the activities and outcomes of stewardship, not just policy statements and investors are expected to exercise stewardship across asset classes. For example, for listed equity, fixed income, private equity, infrastructure investments, and in investments outside the UK. There are also expectations about how investment and stewardship is integrated, including environmental, social and governance (ESG) issues.
The Code consists of 12 Principles for asset managers and asset owners, and six Principles for service providers. These are supported by reporting expectations which indicate the information that should be publicly reported in order to become a signatory.
Organisations wanting to become signatories to the Code will be required to produce an annual Stewardship Report explaining how they have applied the Code in the previous 12 months. The FRC will evaluate Reports against our assessment framework, and those that meet the reporting expectations will be listed as signatories to the Code. To be included in the first list of signatories, organisations must submit a final report to the FRC by 31 March 2021 for asset managers and service providers, and 30 April 2021 for asset owners.
FAQs for the UK Stewardship Code 2020 can be seen here. The FRC will continue to update these FAQs in response to queries.
Review of early reporting to the Stewardship Code
The FRC has published a Review of Early Reporting to the Stewardship Code. The purpose of the Review is to support prospective signatories in meeting this new reporting requirements. We analysed 21 responsible investment, active ownership and stewardship reports and looked at how well prospective signatories are addressing the higher standards we have set. It highlights expectations for the 12 Principles and provides examples of effective reporting.
Organisations intending to apply next year may submit a draft report to the FRC for review and comment by 30 November 2020. Reports must be submitted to firstname.lastname@example.org. Please notify us at this email address if you intend to submit a draft report.
Consultation and Discussion Paper
The Stewardship Code was revised following a consultation which closed on 29 March 2019. To find out more about the consultation and read the Feedback Statement, please click here.
In January 2019, jointly with the Financial Conduct Authority (FCA), we published a Discussion Paper, Building a regulatory framework for effective stewardship (DP 19/1). The FCA has published a Feedback Statement in response to the feedback we received, and within the scope of the FCA’s regulatory responsibilities.
The FRC has coordinated closely with the FCA to consider the responses to the Discussion Paper and the appropriate interaction between the Code and regulatory requirements to encourage effective stewardship.
UK Stewardship Code 2012
The 2012 Code was closed to new applicants on 31 December 2019. Organisations will remain signatories to the UK Stewardship Code until the first list of signatories to the 2020 Code is published. Existing signatories to the Code will need to submit a Stewardship Report that meets the FRC’s reporting expectations in the 2020 Code, in order to be listed as signatories to the UK Stewardship Code. At this point, the list of 2012 signatories will be archived. To find out more about the 2012 Code and see a list of current signatories, please click here.