We were delighted to remain signatories to the UK Stewardship Code for a fourth year. Alongside its publication of successful signatories, the FRC provided an update on its review of the Code, following an initial process of gathering feedback.

What’s changing?

The FRC has identified several steps to ease the reporting burden for signatories, which take effect immediately and, therefore, apply to October 2024 submissions. The changes are that signatories:

• Won’t be required to report against ‘Context’ sections, unless there have been material changes.
• Will only be required to report against ’Activity’ and ‘Outcome’ sections for Principles 3, 4 and 7–12 (ie those principles where action is most likely to have taken place).
• Can use content from previous reporting and cross-reference across Principles.
• Will only be required to report on Escalation and Collaboration principles (10 and 11) where necessary.

We know that investors’ stewardship resource is limited, so we welcome these changes. Reporting shouldn’t be a material impediment to more organisations becoming signatories, nor should it reduce time that could be otherwise spent on stewardship activity. Therefore, we believe these steps offer a sensible reduction in the reporting burden, focusing attention on areas of change and activity.

Our recent paper highlighted a number of learnings from several years of supporting clients in their stewardship code reporting. We noted that organisations should be making full use of their stewardship reporting to communicate with stakeholders. By permitting organisations to make use of already published materials and case studies, we hope that the reporting of activity can become more of an ongoing exercise, with actions reported as they happen, rather than annually.  

What’s happening next?

The FRC notes that it will focus the next stage of its review on various elements of the Code, which include:

• Purpose: whether the Code prioritises creation of sustainable value and growth
• Principles: how parties engage with each other
• Processes: how the Code encourages high-quality outcomes without undue burden
• Positioning: where the Code sits in the wider regulatory and policy landscape, having seen reference to it in the General Code of Practice, which is now in force.

The review will also include an assessment of the role of – and minimum expectations for – proxy advisers, whose involvement has grown since the Code was updated. We will engage with the FRC over the year to support these efforts, both as a signatory ourselves and as advisers to many other signatories. And we’ll respond to the proposed consultation when it’s published later this year.

If you have any questions, or want to discuss further please get in touch.