New Chronos podcast considers upcoming review of the UK Stewardship Code
New Chronos podcast considers upcoming review of the UK Stewardship Code
It’s approaching five years since the UK relaunched its Stewardship Code, and we decided to make the Financial Reporting Council’s (FRC’s) current review of the Code the topic for our first Chronos Talks podcast.
On the show, Chronos experts Ash Eyers and Dr. Rory Sullivan discuss whether the Code - now backed by over 270 signatories managing more than £44 trillion - is bringing benefits to investors and delivering real-world positive impacts. They also offer candid reflections on how investors can extract value from the Stewardship Code reporting process and how the FRC might strengthen the Code to deliver better investment outcomes.
Discussion highlights
The issue of reporting burden is a recurring theme in relation to every disclosure requirement. The Code is no exception with Ash pointing out that there are significant grumbles among some investors about the time and resources that stewardship reporting requires. In responding to this challenge, Rory comments that Chronos’ experience has been that those investors that use stewardship reporting as a chance to review and reflect on their engagement processes have managed to feel real benefits. For example through clarifying their stewardship objectives, through identifying areas of strength and weakness, through improving their monitoring processes and ultimately improving their investment decision-making. These organisations have also been able to take a more thoughtful and effective approach to communications, as stewardship activity can be a great way to turn complex investment beliefs and strategies into a relatable story that resonates with beneficiaries and other key stakeholders.
In terms of impact, both Rory and Ash agree: the Code is far from perfect but is driving change. Examples include the increased resources flowing into better stewardship and the growing number of positive outcomes being cited by individual investors from their engagements with companies and other entities.
What is also striking is how the most significant and the most credible real-world impacts come when investors collaborate, and where those collaborations are underpinned by detailed benchmarks and indicators to set milestones and assess success. Examples like the Investor Mining and Tailings Safety Initiative, Business Benchmark on Farm Animal Welfare (BBFAW) and CA 100+ Net Zero Benchmark are all discussed.
Returning to the Code, Rory and Ash offer some practical recommendations on how the FRC might further strengthen the Code. They suggest the FRC should:
· Continue to scrutinise investment stewardship activity. If the FRC weakens its review processes, it is almost certain that investors will follow suit.
· Encourage investors to think about the impacts of stewardship over multiple years, not just the specific 12-month reporting period.
· Proactively engage with other reporting initiatives to encourage alignment and mutual recognition, with a view to delivering efficiencies for investors.
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