Stewardship code has positive impact by driving up standards

The UK Stewardship Code is having a positive impact on the practice and reporting of asset managers and owners, according to new research.

The research, commissioned by the Financial Reporting Council (FRC), found that both asset managers and owners are very positive about the impact of the code and that there was strong evidence of material changes to practice in the areas of governance, resourcing, stewardship activities, outcomes and reporting.

The evidence was drawn from 55 asset managers and owners, and all had undertaken some organisational restructuring to better integrate stewardship within their investment decision-making, a new requirement of the code.

Almost all (96%) of the respondents reported increased stewardship teams since the introduction of the revised code and opportunities for more formal career progression in stewardship. More than three quarters (77%) said the code’s influence had improved the quality of engagement.

Asset owners reported feeling more empowered to monitor their investment managers. The contribution to industry-wide change was widely supported and some identified the focus on long-term goals for the investment community as being particularly effective.

FRC has been responsible for the UK Stewardship Code since December 2009. The code was substantially revised in 2019 to include a wider definition of stewardship, applying to a range of asset classes and with a greater focus on stewardship activities and the outcomes of those activities.

“We commissioned this independent research so that we could assess the impact of the revised code on stewardship practices, and it is very encouraging to see how the quality of practice and reporting have improved under its influence,” said Sir Jon Thompson, the FRC’s CEO.

“We will learn from this research to maintain our standing as world-leaders in this area and continue to build on the code’s effectiveness.”