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FRC proposes revisions to the UK Stewardship Code

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31 Jan 2019

The Financial Reporting Council (FRC) is consulting proposed changes to the UK Stewardship Code (“the Code”).

The revised Code sets higher expectations for investor stewardship policy and practice and will focus on how effective stewardship delivers sustainable value for beneficiaries, the economy and society.

The revised Code aims to increase demand for more effective stewardship and investment decision-making which is better aligned to the needs of institutional investors’ clients and beneficiaries. It also aims to set out more rigorous reporting requirements, to be overseen by the FRC, focusing on how stewardship activities deliver outcomes against objectives.

The significant proposed changes to the Code include:

  • Purpose, values and culture: Investors must report how their purpose, values and culture enable them to meet their obligations to clients and beneficiaries, aligning the Code to the UK Corporate Governance Code.
  • Recognising the importance of environmental, social and governance (ESG) factors: The proposed code refers to ESG factors. Signatories are expected to take material ESG issues into account when fulfilling their stewardship responsibilities.
  • Stewardship beyond listed equity: The proposed Code now expects investors to exercise stewardship across a wider range of assets where they have influence and rights, in the UK and globally.

Comments on the questions raised within the consultation are invited until 29 March 2019. A press release and the link to the revised UK Stewardship Code is available on the FRC website here.

Additionally the FRC and the Financial Conduct Authority (FCA) have published a joint discussion paper entitled ‘Building a regulatory framework for effective stewardship’. The discussion paper aims to enhance the debate about what effective stewardship entails, what the minimum expectations of financial services firms which invest for clients and beneficiaries should be, what higher standards the UK should aspire to and how these might be achieved. Comments on the discussion paper are invited until 30 April 2019.  A press release and the Discussion paper is available on the FCA website here.

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