On Jul. 22, UK FRC announced significant update to stewardship code.
UK FRC announced a significant update to the UK stewardship code, following a review.
Follows UK FRC Feb. 2024 announced UK stewardship code 2020 review, see #202523.
Changes Overview
UK FRC announced significant revisions to UK Stewardship Code application process and committed to five priority areas of review as it continues its full revision the Code.
These changes will remove the requirement to annually disclose all Context reporting expectations, except for various new reports or specific material changes to the data.
The changes will also remove the requirement to annually disclose against Activity and Outcome reporting expectations for some Principles, as well as explicitly allowing the use of various content from previous reporting and cross-referencing of such reports.
They will also set clear expectations of what is considered an outcome for stewardship purposes, and emphasize the ability to exercise reporting against Principles 10, on the collaborative engagement process, and Principles 11 on escalation where necessary.
This provides clarity on areas signatories outlined as challenging to address, reduce the volume of reporting and provide flexibility defining how users undertake stewardship.
Next Steps
Following extensive engagement with over 1,500 stakeholders, during early 2024, the UK FRC will now focus on five specific themes in a new phase of its revision the Code.
These are Purpose – UK FRC will consider stakeholder views and set out its expectation of effective stewardship, what this is in practice, and how reporting can help deliver it.
Principles – UK FRC is considering reporting necessary to deliver on renewed purpose.
Proxy Advisors – UK FRC will consider how Code might support greater transparency.
Process – UK FRC will take forward proposals to reduce the reporting burden currently associated with being a Code signatory, as well as to ensure that information included in reports is useful and accessible to all underlying investors and other stakeholders.
Positioning – UK FRC is working closely with other regulators like the DWP, UK TPR and UK FCA to support understanding the revised Code and its successful implementation.
In addition, the Code will also continue to support all of the objectives of those other regulators to avoid any confusion and/or duplication that signatories may encounter.
UK FRC will launch a formal public consultation on the Code later in 2024, but given significance of new changes, it will be hosting a further phase of focused engagement with its stakeholders throughout Aug. and Sep. 2024 on the five changes announced.
Code Signatories
UK FRC announced the list of Code signatories has been updated following applications.
There are now 287 signatories, representing £50.1 trillion in assets under management (AUM), marking an increase from the previous 273 signatories and £43.3 trillion AUM.
The diverse range of signatories comprises 196 asset managers, 72 asset owners, and 19 service providers, reflecting the Code's widespread adoption across financial sector.
Effectiveness
The reporting changes will apply for the next application window, Oct. 31, 2024, and UK FRC will be writing to signatories to inform them of how the changes impact them.
