FRC promotes improved reporting by signatories to the Stewardship Code
14 December 2015
The Financial Reporting Council will introduce public tiering of signatories to the Stewardship Code in July 2016 to improve reporting against the principles of the Code and assist investors. Improved reporting will help asset owners judge how well their fund manager is delivering on their commitments under the Stewardship Code; help those who value engagement to choose the right manager; and in consequence should provide a market incentive in support of engagement.
The Stewardship Code, introduced by the FRC in 2010, sets out a number of areas of good practice to which investors should aspire and operates on a comply or explain basis. Over the past five years the quality and quantity of stewardship has improved but not consistently and transparently.
To promote commitment to stewardship the FRC will assess signatories’ reporting against the Code and make public its assessment. Signatories will be assessed as being:
- Tier 1 - meeting reporting expectations in relation to stewardship activities. Additionally, asset managers will be asked to provide evidence of the implementation of their approach to stewardship. The FRC will look particularly at conflicts of interest disclosures, evidence of engagement and approach to resourcing and integration of stewardship; or
- Tier 2 – not meeting those reporting expectations.
Before making a public assessment, the FRC will contact firms with feedback to allow time for improvements. The FRC encourages signatories to engage with this process positively and be proactive in improving their reporting of stewardship activities.
Sir Winfried Bischoff, Chairman of the FRC, said:
“The Stewardship Code has helped to raise the profile of stewardship, normalised discussions about stewardship in the investment chain and led to improvements in the quality and quantity of engagement between investors and companies. We wish to maintain momentum by ensuring that signing up to the Stewardship Code is a true marker of commitment.”
Notes to editors:
1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
2. The Stewardship Code aims to enhance the quality of engagement between investors and companies to help improve long-term risk-adjusted returns to shareholders.
Details of all signatories, with links to the statements on their websites are available here. Inclusion on the website should not be interpreted as an endorsement by the FRC of the accuracy of the statements or the policies pursued by individual institutions.
First published in July 2010 (PDF), the Code was revised in September 2012. Signatories were encouraged to update their policy statements after the revised Code took effect from 1 October 2012.
The Code sets out a number of areas of good practice to which the FRC believes institutional investors should aspire. It also describes steps asset owners can take to protect and enhance the value that accrues to the ultimate beneficiary.
The FRC sees the UK Stewardship Code as complementary to the UK Corporate Governance Code for listed companies and, like that Code, it should be applied on a 'comply or explain' basis.
Since December 2010 all UK-authorised Asset Managers are required under the FCA's Conduct of Business Rules to produce a statement of commitment to the Stewardship Code or explain why it is not appropriate to their business model. Further information can be found on the FCA website. Institutions that manage several types of fund need only make one statement.
Read or download the Stewardship Code (PDF).