FRC launches stewardship code review

28th February, 2024

The UK’s Financial Reporting Council (FRC) has launched a review of the UK Stewardship Code 2020 to ensure it supports the growth of the UK’s competitiveness on the global stage.

The review will focus on the extent to which the code supports the creation of long-term value through investor-issuer engagement that drives issuers’ prospects and performance.

It will also assess how the code creates reporting burdens on issuers and any unintended consequences of the code, such as short-termism in targets and outlook.

The code is designed to safeguard the interests of the public and pension holders by promoting transparency and accountability. The principles encourage alignment of incentives throughout the investment chain to improve the benefits for the ultimate investment beneficiary.

The review will begin with a targeted outreach focussed on the four main groups affected by the code: issuers, asset managers, asset owners and service providers. There are currently 273 signatories to the Code, representing £43.3 trillion assets under management.

The FRC said it expects these outreach discussions to uncover a range of issues that will inform the second phase.

The next phase will be a public consultation, which is planned to launch after the 2024 AGM voting season during the summer months.

The revised code will be most likely published in early 2025.

The launch follows the FRC’s revisions to the UK Corporate Governance Code that enhance transparency and accountability.

It said that following the feedback received during that consultation, it is “clear that now is an opportune moment for a fundamental review process to ensure that that the principles of the Code are still driving the right stewardship outcomes for investors”.