New research shows positive impact of revised Stewardship Code

News types: Codes and Standards Announcements, Generic Announcement, Publications

Published: 5 July 2022

New research commissioned by the Financial Reporting Council (FRC) has identified the positive impact the revised UK Stewardship Code has had on the practice and reporting of asset managers and owners. 

The research, which took evidence from 55 asset managers and owners, found that both groups are very positive about the impact of the Code and that there was strong evidence of material changes to practice in the areas of governance, resourcing, stewardship activities, outcomes and reporting.

All organisations in the sample had undertaken some organisational restructuring to better integrate stewardship within their investment decision-making, a new requirement of the Code. 96% of the respondents reported increases in the size of their stewardship teams since the introduction of the revised Code and noted opportunities for more formal career progression in stewardship. 77% said the quality of engagement was better because of the Code’s influence.

Asset owners reported that the most significant way the Code has influenced their approach is that they now feel more empowered to monitor their investment managers. Respondents were also supportive of the Code’s contribution to industry-wide change, with some celebrating the Code’s focus on long-term goals for the investment community.

The FRC has been responsible for the UK Stewardship Code since December 2009. It was substantially revised in 2019 to include a wider definition of stewardship, applying to a range of asset classes and with a greater focus on stewardship activities and the outcomes of those activities.

The FRC commissioned the independent research, carried out by a team of researchers from Minerva Analytics, the Durham University Business School and the Dickson Poon School of Law, King’s College London, to better understand the current stewardship practices of asset managers and asset owners and to assess the impact that the revised Code has had.

The FRC’s CEO, Sir Jon Thompson said:

“We commissioned this independent research so that we could assess the impact of the revised Code on stewardship practices, and it is very encouraging to see how the quality of practice and reporting have improved under its influence.

"We will learn from this research to maintain our standing as world-leaders in this area and continue to build on the Code’s effectiveness.”

Business Minister Lord Callanan said:  

“Investors have a vital role to play ensuring our major companies are run responsibly and deliver long-term value.
“I’m pleased to see that the revised Stewardship Code is already having a material positive impact to that end, increasing engagement between investors and companies, while improving the oversight of big business to the benefit of the wider economy.”  

Economic Secretary to the Treasury, John Glen, said:

It’s welcome to see that the FRC’s world-leading Stewardship Code is already driving higher standards among the UK’s asset owners and asset managers.
Enhancing and embedding stewardship across organisations and investment chains is key to ensuring that the UK’s investment management sector delivers long-term sustainable benefits for investors, the economy and the environment.”

A link to the full report is available here.