The Financial Reporting Council said Thursday that is has substantially revised its U.K. Stewardship Code for investments made on behalf of pension participants in the U.K.
The FRC first published the Stewardship Code in 2010, and last revised it in 2012. The new code, which takes effect Jan. 1, 2020, sets a substantially higher standard to reflect changing expectations of investors and developments in sustainable and responsible investment.
"This new Stewardship Code marks a step-change in the expectations for investors, their advisers, and how they manage investments for their savers and pensioners," FRC Chairman Simon Dingemans said in a statement. He described it as an ambitious revision and said that the council will be looking for widespread adoption by the investment community.
"The FRC will be holding signatories to account by regular review of adoption of the new code and the quality of the reporting against its principles," FRC Chief Executive Officer Jon Thompson said in the same statement. "Asset owners and beneficiaries will then be able to see if those investing on their behalf are doing so in accordance with their needs and views. They will also be able to see the impact of their managers' decisions, particularly in relation to environmental, social and governance issues, including climate change."
Key changes in the new code include:
- A wider focus on the whole investment community, including asset owners, service providers and asset managers.
- A requirement to report annually on stewardship activity and outcomes.
- Expectations that signatories will take into account environmental, social and governance factors, and align investment decisions with clients' needs.
- Having signatories explain how they exercised stewardship across asset classes and outside the U.K.
- Requiring signatories to explain their organization's purpose, strategy and culture and how those relate to stewardship practices, as well as governance, resourcing and staff incentives.
- Hermes Investment Management CEO Saker Nusseibeh in a separate statement described the updated code as "a landmark moment for the investment industry" that presents a significant opportunity to shift toward outcomes-focused stewardship.
"The new code makes it clear that stewardship is no longer a supplementary investment activity, but something that must be core to all aspects of the investment process, and applied across all geographies and asset classes," Mr. Nusseibeh said.