UK FRC launched a consultation on its proposed updates to the UK Stewardship Code.
Follows UK FRC Jul, 2024 stated a significant stewardship code change, see #220221.
Consultation Overview
The UK FRC launched its consultation on some significant updates to be made to the UK Stewardship Code, focusing on supporting economic growth and investment and delivering increased transparency for millions of UK investors, savers and pensioners.
The UK Stewardship Code has raised standards of Stewardship in UK and is recognized globally as driving best practice in industry, operating as part of regulatory framework.
The consultation, follows extensive engagement with over 1,500 stakeholders during 2024 and reflects four years of analysis of reporting against the 2020 Code version.
For first time in the Code, there is a separate dedicated Principles for different service providers, like proxy advisers and investment consultants, to help promote reporting on how they support stewardship activity through the whole of the investment chain.
Also, after engagement with stakeholders, the Code will now be supported by targeted guidance to indicate range of reporting information, signatories might wish to include.
Consultation builds on interim measures from Jul. 2024, like reduced annual reporting requirements and greater clarity on stewardship outcomes, welcomed by signatories.
Key Proposals
A revised and enhanced definition of stewardship emphasizing the need for long-term sustainable value for clients and beneficiaries as a key outcome of good stewardship.
Streamlined reporting process, separating policy and activity, to reduce the burdens.
Introducing targeted principles for different types of signatories and service providers, and including, for the first time, a new dedicated Principle for use by proxy advisors.
New guidance to support effective implementation and help signatories with transition.
Comment
UK FRC CEO, Richard Moriarty, commented UK Stewardship Code plays a vital role in promoting long-term value for millions of people who trust their hard-earned savings and pensions to the wider investment community in order to provide for their future.
Consultation marks important evolution of Code, ensuring it maintains high standards of stewardship in a manner that continues to support UK growth and is proportionate.
Proposals reflect extensive stakeholder engagement UK FRC has undertaken in 2024.
It aims to reduce unnecessary reporting burden while ensuring savers and pensioners better understand how money is managed on their behalf to create long-term value.
Next Steps
UK FRC will host a series of engagement events during consultation period to gather further feedback from stakeholders on the proposals, and an updated Code is expected to be published later in 2025, for implementation within first reporting cycle in 2026.
Effectiveness
The consultation process on the updates will run from Nov. 11, 2024 to Feb. 19, 2025.
