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Stewardship Code review

On 22nd July, the FRC gave an update on their Stewardship Code review, announcing further outreach to allow more discussion with stakeholders before they consult on any proposed revisions to the Code.

The FRC outlined their areas of focus for the next stage of the review (the "Five Ps"), which are:

  • the purpose of the Code and whether it prioritises creating sustainable value and supports growth;
  • the principles, notably those relating to how parties engage with each other;
  • the role of proxy agencies including how their research translates into voting recommendations and improving their transparency - given the shift in capital markets toward index and passive investing, the role of proxy advisors holds greater significance than when the Code was first developed. There is a question as to whether the Code should reflect, in a proportionate way, the importance of proxy advisors by setting minimum expectations. 
  • the process and whether it encourages high quality stewardship outcomes without adding undue burden; and
  • the positioning of the Code within the broader stewardship regulatory and policy space. 

The roundtable for corporates is on 20th Aug and the Society is seeking to attend and represent member views. 

The FRC also published the latest list of signatories, and announced significant revisions to the UK Stewardship Code application process with immediate effect, to reduce the reporting burden on signatories to the Code. Effective for the next application round in October, applicants have the option to not disclose against ‘Context’ reporting expectations of the Code, unless there are material changes to update. In addition, signatories will only be required to report against ’Activity’ and ‘Outcome’ reporting expectations for Principles relating to conflicts of interest (3), promoting well functioning markets (4), stewardship, investment and ESG integration (7), monitoring managers and service providers (8), engagement (9), collaboration (10), escalation (11), and exercising rights and responsibilities (12). To further ease the length of reports, the FRC are explicitly allowing use of content from previous reporting and welcome cross-referencing, and are publicly restating that Principles relating to collaboration (10) and escalation (11) only need to be exercised where necessary. 

Published 25 July, 2024