UK Stewardship Code FAQs
The FRC will continue to update these FAQs in response to queries. If you have more questions about the Code, please contact us at firstname.lastname@example.org
Last updated: 19/10/2021
Who should apply to become a signatory to the Code?
Asset owners such as pension schemes, insurers, foundations, endowments and sovereign wealth funds. Guidance from The Pensions Regulator encourages defined benefit and defined contribution pension schemes to become signatories to the Code. Guidance from the Department for Levelling Up, Housing and Communities) recommends that administering authorities in the Local Government Pension Scheme become signatories to the Code.
Asset managers (investment managers) that manage assets on behalf of UK clients or invest in UK assets. FCA-regulated asset management firms covered by the FCA Conduct of Business Sourcebook (COBS) Rule 2.2.3 are required to disclose the nature of their commitment to the Code or where they do not commit to the Code, their alternative investment strategy.
Service providers such as investment consultants, proxy advisors, pension lawyers and data and research providers that support asset owners and asset managers to exercise their stewardship responsibilities. Fiduciary managers will need to fulfil reporting expectations relevant to their role from both the Principles for asset owners and asset managers and Principles for service providers.
How do we apply to become a signatory?
In order to become a signatory, organisations will have to submit an annual Stewardship Report (the Report) to the FRC explaining how they have applied the Code over a 12-month period. Reports must be reviewed and approved by the applicant's governing body, and signed by the chair, chief executive or chief investment officer.
The FRC will evaluate Reports and those that meet the reporting expectations will be listed as signatories to the Code. Once the applicant has been accepted as a Code signatory and the Report is approved by the FRC, the Report will be a public document and must be made available on the signatory’s website. The applicant may then use the Stewardship Code signatory logo.
Please find here more information on how to apply.
Our UK business is a separate legal entity within a global organisation. Which should apply?
Organisations should in the first instance seek to apply the Principles across their business and report as a single global organisation. Where an organisation is unable to do so, the UK entity may report. A clear explanation for this and the scope of the information included in the Report should be provided.
My organisation is a signatory to the 2012 Stewardship Code, do we remain a signatory or do we need to apply?
Previous signatories to the 2012 Code will need to apply to become a signatory to the 2020 Code by submitting a Stewardship Report that meets the FRC expectations. All Signatories to the 2020 Code will have to annually update and submit their Report to remain on the list.
Can we keep our 2012 Stewardship Code statement available on our website if we will be applying to become a signatory to the 2020 Code?
The first list of signatories to the 2020 Code was published on 6 September 2021. Previous signatories to the 2012 Code should now remove all 2012 Code disclosures from their website. Those who have been successful in their application to become signatories to the 2020 Code are asked to make their new report available as soon as possible.
When should we publish our Stewardship Report 2020 on our website?
There are two options available regarding the publication of Reports. Applicants may:
- Publish their Stewardship Report at the same time as they submit it to the FRC; or
- Wait until the FRC have confirmed if they will be signatories before publishing their Report.
Applicants must not refer to themselves as a signatory to the UK Stewardship Code
2020 before their application has been accepted and the result published.
Once an applicant has been accepted as a Code signatory and the Report is approved by the FRC, the Report will be a public document and must also be made available on the signatory’s website.
Should we notify the FRC that we will apply to become a signatory?
The FRC encourages any organisations that intend to apply to become signatories to the Code to notify us of their intention to do so at email@example.com
How should we structure the Report?
The Report should be a single document structured to give a clear picture of how the organisation has applied the Code.
Applicants should aim to create a document that is informative and useful to clients and beneficiaries as well as the regulator. Signatories should structure their Reports in a way that achieves this objective – the FRC does not require signatories to address each Principle separately.
What does ‘apply and explain’ mean for the Principles?
To become a signatory to the Code, organisations are required to apply all relevant Principles – 12 Principles for asset owners and asset managers, and 6 Principles for service providers – and explain how they have done so over a 12-month period.
The Principles are supported by reporting expectations, which indicate the information that organisations should disclose to demonstrate their application of the Principles. There may be occasional cases where the reporting expectations do not apply for an organisation’s business model. In these cases, the FRC would expect, as part of the Report, a clear explanation of why the reporting expectation is not appropriate.
Which sets of reporting expectations should we apply?
The reporting expectations for Principles 6, 7, 8, 9, 11 and 12 have different reporting expectations for those investing and / or engaging directly with issuers (for example asset managers, and asset owners investing or engaging directly) and those investing indirectly and overseeing an organisation that engages on their behalf (for example asset owners and fund of funds). Applicants should choose the approach most appropriate to their business model.
Organisations carrying out multiple functions may find it appropriate to report against both sets of reporting expectations, for example organisations that invest both directly with issuers and through funds.
The Code requires signatories to apply stewardship across all asset classes and geographies. How should we report on this?
Reporting should be proportionate, with examples reflecting the breakdown of assets under management by asset class and geography reported under Principle 6. For example, if an organisation is invested 50% in equities and 50% in fixed income, examples in the report are expected to evidence approaches in both asset classes, not just equity. Where this is not the case, an explanation should be given.
The FRC recognises that investors in asset classes outside UK listed equity may have different rights, responsibilities and abilities to influence. Applicants should consider what forms of rights and influence they have beyond voting rights and explain how these have been exercised. Where organisations face practical or legal barriers to exercising stewardship, they should explain these and any actions they are taking as a result.
Should we include policy documents and voting records within the Report?
The Report should provide enough information to enable the reader to have a good understanding of the application of the Code without having to refer to information elsewhere. However, signatories are not required to provide the full text of policy documents within the Report. They should provide a summary with enough information that readers of the Report can understand the key features of the policy. Where documents are referred to, these should be easily accessible and linked to from the Report.
The FRC does not expect signatories to include their full voting records within the Report. Instead, they should provide meaningful summary information about their voting within the document and link to their voting records, which should be publicly disclosed on their website.