On 5 April 2019, the Pensions and Lifetime Savings Association (PLSA) published its response to the draft 2019 U.K. Stewardship Code, as covered in our Q1 2019 newsletter on page 20.

The U.K. Stewardship Code was last updated in 2012 and is intended to assist institutional investors in the exercise of their stewardship responsibilities by providing principles which are expected to be followed in order to promote the long term success of companies.

In its response, the PLSA supports the general shift in approach with respect to the new Stewardship Code, particularly

  • the explicit reference to environment, social and governance factors (ESG);
  • the expansion of the Code to cover asset classes beyond equity; and
  • the differentiated guidance for different parts of the investment chain (including for service providers).

The response notes that there may be tension between introducing this more stretching standard and the objective of the FRC to encourage more asset owners to become signatories, especially as many asset owners or managers are reluctant to become a signatory to the Code given the resource implications of full compliance. This is despite many non-signatory members of the PLSA being in support of the principles contained within the Code; 71% of respondents to the PLSA's 2019 stewardship survey indicated that they only select managers with a clear commitment to stewardship.

The PLSA suggests that the FRC should therefore consider means of encouraging asset owners to express their support for, and commitment to, the aims of the Stewardship Code, without the resource implications of becoming a signatory. The FRC should also acknowledge that schemes often delegate activity on stewardship issues to their managers.

The PLSA does not support the concept of different codes for different types of signatories, but does endorse a pragmatic approach which recognises that not all signatories will be able to fulfil the new reporting requirements and commitments of the code, but encourages more signatories to engage with it.

The full response is available here. The consultation ended on 29 March 2019, but can be viewed here.

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