FRC releases major update to UK Stewardship Code
July 22nd, 2024
The Financial Reporting Council (FRC) has published significant revisions to the UK Stewardship Code application process.
The regulator has also announced that it has identified five priority areas of review, following engagement with over 1,500 stakeholders, as it continues its revisions of the code.
The first priority area is purpose, considering what defines effective stewardship and what this looks like in practice, and the second is principles, examining what reporting will be necessary to deliver on the renewed purpose.
The third is proxy advisors, with the FRC considering how the code can improve transparency of their activities, and the fourth is process, with the regulator committing to taking forward proposals to reduce the reporting burden currently associated with being a signatory of the code.
The final priority area is positioning, as the FRC said it will work to support organisations in understanding the revisions and implementing it.
The UK Stewardship Code has 289 signatories, representing £50.3 trillion in assets under management.
The FRC announced some immediate changes to reduce the reporting burden, including removing the requirement to annually disclose all ‘context’ reporting expectations, except for new reports or material changes, and removing the requirement to annually disclose against ‘activity’ and ‘outcome’ reporting expectations for some principles.
The FRC will now also explicitly allow the use of content from previous reporting and cross-referencing of such reports and set clear expectations of what is considered an ‘outcome’ for stewardship purposes.
It will also emphasise the ability to exercise reporting against Principles 10, collaborative engagement, and 11 escalation ‘where necessary’.
These changes will apply for the next application window, which opens 31 October 2024, and the FRC will write to signatories individually to address how these updates will impact their reporting.
It will launch a formal public consultation on the code later this year but said that, due to the significance of these changes, there will also be a further phase of focussed engagement with stakeholders throughout August and September.
The FRC’s review launched in February to assess how the code supports the creation of long-term value through investor-issuer engagement.
Last Updated: 22 July 2024