Time to get the UK Stewardship Code right

The Financial Reporting Council (FRC) has launched a consultation on proposed updates to the UK Stewardship Code. These revisions represent an important and, it is hoped, conclusive step in adapting the Code to align with evolving investment practices and societal priorities.

Emphasis on sustainable value

A key feature of the updates is the emphasis on what the FRC defines as sustainable value. “Stewardship is the responsible allocation, management, and oversight of capital to create long-term sustainable value for clients and beneficiaries,” the FRC has stated.

By refining its principles from the 2020 iteration, the FRC aims to address concerns that the previous definition led to misinterpretation, with many in the industry assuming “the purpose of stewardship is to pursue environmental and social objectives in and of themselves.”

In this consultation, the FRC seeks to adjust the definition so that economic, social, and environmental outcomes are viewed as natural by-products of effective stewardship, rather than the core purpose.

Impact on global stewardship standards

The updates also aim to reinforce the UK’s reputation as a global leader in stewardship. Internationally recognised for its high standards, the Code has attracted signatories from around the world, with 40% headquartered outside the UK.

Impactive sees this as an opportunity for the FRC to establish a pragmatic and influential global standard for stewardship. The Code has changed significantly over the past decade in terms of expectations, process, and content, so it’s important any further changes don’t undermine trust in its leadership role.

Enhancing clarity and flexibility for signatories

Another key aspect of the proposed revisions is enhancing clarity and flexibility. Tailored principles for different types of signatories, such as asset managers and proxy advisors, are intended to make reporting more meaningful while reducing unnecessary complexity. These adjustments reflect the varied needs of stakeholders and highlight the FRC’s desire for practical, effective stewardship.

Consultation timeline and next steps

The consultation closes on 19 February. The FRC will host engagement events during this period to gather feedback, with the updated Code expected to be published in 2025 and implemented in time for the first reporting cycle in 2026.

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