26th February 2020
The Financial Reporting Council (FRC) has published a new UK Stewardship Code 2020 (Code) setting out good stewardship practice for asset managers, asset owners and service providers when engaging with investee companies. The new code replaces the version that has been in existence since 2012 and applies to reporting years beginning on or after 1 January 2020.
The Code defines stewardship as: “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society” and lists the following activities as coming within the meaning of the term:
The Code has been restructured so that it follows a similar structure to that of the 2018 UK Corporate Governance Code. It is divided into five main sections covering the core areas of stewardship responsibility: (i) purpose, objectives and governance; (ii) investment approach; (iii) active monitoring; (iv) constructive engagement and clear communication; and (v) exercise rights and responsibilities. The Code follows an ‘apply or explain’ model setting out twelve principles for asset owners and asset managers and six principles for service providers with both sets of principles being supported by reporting expectations.
The main changes from the 2012 Stewardship Code are:
While the Code and reporting on its application are voluntary, there is a requirement in the FCA Handbook for asset managers to disclose whether or not they comply with the Code. In addition, the likely replacement of the FRC with the Audit, Reporting and Governance Authority may mean that the regulator will have further powers to enforce the UK Stewardship Code in the future.
Corporate and Head of Food & Drink
Corporate and Head of International