Regulator gives guidance to investors on the UK Stewardship Code

In its Early Review of Reporting under the Stewardship Code 2020, the FRC provides expectations and guidance to investors.

UK regulator the Financial Reporting Council has set out the ways investors can improve their reporting under the Stewardship Code 2020.

In his foreword to the report, FRC chief executive Sir Jon Thompson, said: “There is no doubt that increasing societal expectations and regulatory pressure place greater scrutiny on how investors are effective stewards of the assets entrusted to their care.”

He added that there was a “clear and consistent expectation” that environmental, social, and governance (ESG) issues should be included in stewardship and investment decision-making.

A “new social contract is emerging”, Thompson suggested, which meant the Code offered “a real opportunity for signatories to demonstrate the impact of their stewardship activities on a wide range of stakeholders”.

In its Review of Early Reporting, the regulator offered this guidance to investors when preparing their stewardship reports:

  • Fully explain the structures and processes that underpin stewardship decision-making and the rationale for approaches taken, reflecting on effectiveness of approach and any related outcomes.
  • Address all asset classes and geographies. Even if the stewardship approach differs or is not as developed in other asset classes, this should be explained rather than avoided.
  • Focus on activities and outcomes — reports should be supported with specific evidence from the reporting period, rather than just a general statement of approach.

The revised Stewardship Code took effect on 1 January 2020 after a period of consultation. It sets out 12 principles for effective stewardship for UK asset managers and six principles for service providers, eg, investment consultants and proxy advisers, who indirectly enable their clients to deliver stewardship. It also introduces an annual stewardship report to be made by those signing up to the code.

— Oliver Rowe ( is an FM magazine senior editor.