The Financial Reporting Council has today published commissioned research which set out to explore the impact of the revised UK Stewardship Code: see here (pdf). The research concludes that there has been a positive impact on the practice and reporting of asset managers and owners. For a short overview of the research findings, see here.
The Financial Reporting Council has, today, published an updated list of signatories to the UK Stewardship Code. The updated list includes 74 new signatories, from 105 applications made at the end of October 2021. The total number of signatories is now 199.
Perhaps more interestingly, the FRC has stated - at the bottom of its press release announcing the new 74 signatories - that following "wide engagement with stakeholders" it no longer plans to tier or differentiate signatories to the Code from 2022. Signatories were not tiered last year, but in March 2021 (see here, pdf, para. 39) the FRC said that it "may in future consider introducing mechanisms to differentiate the quality of signatories' reports". The reason given by the FRC today (to quote from the press release): "Asset owners, investment consultants and investment managers felt that
standard to become a Stewardship Code signatory is already high and that
the FRC should focus on encouraging more of the market to reach this
standard".
The Financial Reporting Council has, today, published its first list of successful signatories in respect of the UK Stewardship Code 2020: see here. The FRC received 189 applications (147 from asset managers, 28 from asset owners and 14 from service providers) of which two thirds (125) were successful. Unsuccessful applicants, the FRC has said, tended not to address all of the Principles in the Code or did not provide sufficient evidence.
Would you like to know some more about stewardship in the UK and the development of the UK Code?
I can - if you will forgive the self-promotion - point you in the direction of a forthcoming publication, written with a colleague, Daniel Cash, at Aston: Investor Stewardship and the UK Stewardship Code.
Last December, the Financial Conduct Authority introduced a new disclosure rule requiring commercial companies with a UK premium listing to disclose in their annual report whether they had made disclosures consistent with the TCFD recommendations: see here. Today the FCA announced its intention to extend this disclosure regime to (1) standard listed companies and (2) asset managers, life insurers, and FCA-regulated pension providers - see, respectively, here and here.
The Financial Reporting Council has today published a revised edition of the UK Stewardship Code: see here (pdf). This new Code - titled the Stewardship Code 2020 - is effective from 1 January 2020 and is accompanied by a feedback statement: see here (pdf). The Code contains Principles for asset managers and asset owners and a separate set of Principles for service providers. It operates on the basis of "apply and explain".
The Financial Conduct Authority has published PS19/13 Improving shareholder engagement and increasing transparency around stewardship: see here (pdf). The statement contains final rules and feedback following the FCA's earlier consultation (about which: see here, pdf). The new rules come into force on 10 June and will implement, in part, EU Directive 2017/828 (aka SRD II or the Second Shareholder Rights Directive). They will require, amongst other things, life insurers and asset managers to disclose information concerning their engagement policies and investment strategies (or to explain publicly why these disclosures are not being made). The Financial Reporting Council published a consultation paper earlier this year setting out proposed changes to the UK Stewardship Code: see here. The consultation closed at the end of March and the responses received have now been published: see here. When the consultation was launched, the expectation was that the new Code would be published in the summer; the FRC's draft plan and budget for 2019/20, published last month, states that the new Code will be published in 2019/20.
Last year, Eumedion - the foundation representing institutional investors in the Netherlands - published for consultation a draft Stewardship Code. The finalised edition of the Code - the first Dutch Stewardship Code - was published over the summer: see here (in English, pdf).
The Australian Asset Owner Stewardship Code was published yesterday by the Australian Council of Superannuation Investors: see here (pdf). Further information about this new Code is available in the accompanying FAQs (here, pdf) and media release (here, pdf).
The European Commission has published a consultation paper on institutional investor and asset managers' duties regarding sustainability: see here (pdf). This is part of work being undertaken by the Commission to determine whether, and how, a clarification of such duties could contribute to (a) more efficient allocation of capital and (b) sustainable and inclusive growth. Further information is available here.
The Financial Services Council has published a new standard titled Principles of Internal Governance and Asset Stewardship: see here (pdf). The purpose of the standard is, to quote directly from it, "...to provide guidance to FSC Members who undertake the role of Asset Managers in setting and achieving best practice in fulfilling their fiduciary responsibility as custodians of one of the largest pools of managed funds in the world". The standard is mandatory for FSC full members from 1 July 2018. The standard will operate very much like the stewardship codes seen in other jurisdictions.
The Financial Reporting Council has published an updated list of signatories to the UK Stewardship Code: see here. Last year the FRC published a ranking of Code signatories, placing 40 in the lowest tier - tier 3 - indicating that their approach to stewardship required greater transparency and engagement. Yesterday the FRC announced that tier 3 had been removed, with half of those within it moving into tier 1 or 2 and the remainder deciding they no longer wished to be Code signatories: see here.The Financial Reporting Council has published the results of an exercise that saw it rank signatories (of which there are almost 300) to the UK Stewardship Code into one of three tiers: see here. The ranking was done on the basis of the information provided in signatory statements. More than 120 signatories were placed in tier 1 - the top tier - because they were judged by the FRC to provide a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary. Those remaining in the bottom tier - tier 3 - in six months' time will be removed from the list of signatories because, in the FRC's view, their reporting fails to demonstrate commitment to the objectives of the Code.
A group comprising of well known company directors, investment managers and institutional investors (including the head of the Canada Pension Plan Investment Board), has published a series of corporate governance principles - described as 'commonsense' - for public companies: see here (pdf). The principles cover the following matters: board composition and internal governance; board responsibilities; shareholder rights; public reporting; board leadership; management succession planning; compensation of management; asset managers' role in corporate governance. Further background information is available here.
The European Commission has begun a consultation seeking information on how institutional investors, asset managers and other service providers in the investment chain, factor in sustainability information and performance of companies or assets into investment decisions: see here.
The Financial Conduct Authority has published the terms of reference for its investigation into competition in the asset management industry: see here.
The Securities Commission and Minority Shareholder Watchdog Group have launched the Malaysian Code for Institutional Investors: see here (pdf). The Code was developed by Malaysia's largest institutional investors and contains principles designed to promote effective stewardship.
The International Organization of Securities Commissions has published for consultation a report titled Good Practices on Reducing Reliance on CRAs in Asset Management: see here (pdf). The consultation seeks to identify specific practices to reduce over reliance on external credit ratings; once agreed, the finalised good practices document will be addressed to national regulators, investment managers, and investors.
Andrew Haldane, currently the Executive Director for Financial Stability at the Bank of England but soon to become the Bank's chief economist, delivered a speech today titled "The age of asset management?" in which he identified the risks posed by the asset management industry to financial stability, and the associated policy implications. A copy of the speech is available here (pdf). A summary is available here.
One of the recommendations made last year by Professor John Kay, in his report on UK equity markets and long-term decision making, was the creation of an investor forum. The forum was seen as one way to address the disincentives to engagement by asset managers with investee companies that arise from fragmented shareholdings. Today's Financial Times newspaper reports that the forum will start operating in June next year: see here.
