stewardship code, ESG, Sustainability

Stewardship moves beyond box ticking

The Financial Reporting Council (FRC) has published a new UK Stewardship Code which is due to come into effect on 1 January 2020.

The revised Code has set a higher standard for how money is invested on behalf of UK savers and pensioners that the FRC said reflects “the changing expectations of investors and the significant developments in sustainable and responsible investment and stewardship since the Code was last revised in 2012”.

The new Code has an extended focus that includes asset owners, such as pension funds and insurance companies, and service providers in addition to asset managers.

The FRC has also set out a new requirement to report annually on stewardship activity and its outcomes, while signatories of the revised Code will be expected to take environmental, social and governance factors, including climate change, into account.

Signatories will have to explain how they have exercised stewardship across asset classes and in investments outside the UK.

FRC chief executive Sir Jon Thompson said: “The FRC will be holding signatories to account by regular review of adoption of the new Code and the quality of the reporting against its principles. Asset owners and beneficiaries will then be able to see if those investing on their behalf are doing so in accordance with their needs and views.

“They will also be able to see the impact of their managers’ decisions, particularly in relation to environmental, social and governance issues, including climate change.”   

Sarah Wilson, CEO of proxy voting agency Minerva Analytics, a long-standing signatory, said she welcomed the new Code.

The FRC has laid out a far-reaching agenda for the financial services community which is strongly aligned with the UK’s ambition to be the world-leading centre of excellence for ESG and climate change integration,” she said.

The new code contains the essential ingredients for building trust and encouraging an active ownership approach throughout the investment value-chain.”  

Jocelyn Brown, senior investment manager, sustainable ownership at RPMI Railpen, which is the UK railway pension schemes’ investment manager, said she was pleased to see environmental, social and governance factors, particularly climate change, included in the revised Code as material issues for investors to consider.

At the same time, the UK securities regulator has also published feedback on its study “FS19/7 Building a regulatory framework for effective stewardship”.

Although the FCA has determined that it does not intended to  impose further stewardship-related requirements on life insurers and asset managers at this time, it has identified four industry initiatives that they believe will help address barriers to effective stewardship. These include:

  • Examining how asset owners set and communicate their stewardship objectives and taking actions to promote arrangements between asset owners, asset managers and service providers that support these objectives.
  • Helping to address regulatory, informational and structural barriers to effective stewardship practices, including by consulting on rule changes to enhance issuers’ climate change disclosures.
  • Considering further the role of firms’ culture, governance and leadership in both the management of climate risks and the exercise of stewardship.
  • Pursuing a number of actions to promote better disclosure of firms’ stewardship practices and outcomes.

Find out about the many ways Minerva helps investors meet their Stewardship Code responsibilities. Email:

Last Updated: 24 October 2019
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