One in three applications to UK Stewardship Code fail

Applicants include asset managers, asset owners, and service providers 

September 10, 2021

One in three applicants to the UK’s Financial Reporting Council’s (FRC) Stewardship Code did not meet the required standard, owing to shortcomings in evidence and relying too heavily on policy. 

According to data from the FRC, of the 189 asset managers, asset owners and service providers who applied to become signatories to the code, 125 were successful, yet 64 did not meet the required criteria.  

The UK Stewardship Code aims to set high stewardship standards for those investing money on behalf of UK savers and pensioners and those that support them. The code applies to asset owners, investment managers and service providers such as investment consultants and proxy advisers. 

In a statement, the FRC said the companies that were unsuccessful did not address all the principles or sufficiently evidence their approach to stewardship. They often relied too heavily on policy statements instead of clear actions.

Other weaknesses included reporting on the approaches to review and assurance, as well as the ongoing monitoring of service providers.

The FRC indicated that it was broadly pleased to see investors integrating stewardship and ESG factors into their decision-making processes, as well as extending this beyond listed equities into other asset classes. "There was also some strong reporting on underpinning governance activities," the audit regulator said.

Organisations that have been named as signatories include BlackRock, Fidelity International Baillie Gifford, M&G Investments, Legal & General Investment Management, Royal London Asset Management and Jupiter Fund Management. Combined, the 125 successful applicants represent £20 trillion of assets under management. 

Sir Jon Thompson, the FRC CEO, acknowledged that there had been a significant number of unsuccessful applications, but said that the FRC was “proud of our robust approach to assessment and encourage those who have been unsuccessful to reflect on our feedback and apply again in future”.

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