On 24 October 2019, the Financial Reporting Council launched a substantial revision to the UK Stewardship Code ("Code"). We covered the FRC's consultation on proposed revisions to the Code in our Q1 2019 G&SL newsletter at page 20 and noted that the revised Code was to be published by the end of 2019 in our Q3 2019 G&SL newsletter at page 9.
The revision to the Code sets higher expectations for how money is invested on behalf of UK savers and pensions. This is achieved by ensuring money is managed responsibly, particularly in relation to creating long-term value and considering beneficiary and client needs. Revision of the Code follows the introduction of the new UK Corporate Governance Code for reporting periods starting in January 2019 as part of the comprehensive revision of the UK's corporate governance framework.
Key changes to the Code include the following:
- An extended focus that includes asset owners and service providers as well as asset managers. This will help align the approach of the whole investment community in the interest of end-investors and beneficiaries.
- A requirement to report annually on stewardship activity and outcomes. Signatories' reports should show what has actually been done in the previous year and what the outcome was, including their engagement with the assets they invest in.
- Environmental, social and governance factors, including climate change, should be considered and signatories should ensure their investment decisions are aligned with the needs of their clients.
- Signatories must explain how they have exercised stewardship across asset classes beyond listed equity and in investments outside of the UK.
- Signatories must explain their organisation's purpose, investment beliefs, strategy and culture. They should show how they are demonstrating this commitment through appropriate governance, resourcing and staff incentives.
The Code aims to strengthen the UK's position as a destination for long-term, sustainable investment. It also aims to promote transparency and integrity in business, in turn benefitting the economy, environment and society.
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