Industry

UK Stewardship Reports “in Line” with FRC Expectations

Remaining asset owners and managers must submit their reports by October to make signatory list.

The UK’s Financial Reporting Council (FRC) has confirmed that just under 200 asset owners and managers have met the initial deadline to become the first signatories of the 2020 Stewardship Code. To fully comply, organisations had to outline in their reports how they aligned their investment activities with the code’s requirements throughout 2020.

Overall, around 160 asset managers submitted their final reports ahead of their 31 March, 2021 deadline, while approximately 30 asset owners complied with their 30 April, 2021, date. However, there were 104 asset owner signatories and 178 asset manager signatories to its predecessor, suggesting that a large number of owners have yet to submit their final reports.

Reports must address each of the Code’s updated principles, which include details concerning an organisation’s capital structure, risk, strategy and performance; environmental and social issues; and remuneration and workforce interests.

An initial list of 2020-compliant signatories will be published on the FRC website in summer 2021.

Asset owners which have already submitted their 2020 Stewardship Code report include Aviva, which manages £334 billion in AUM.

“Aviva has reported on our sustainability activity for some time. We welcome the latest developments and are fully supportive of the UK Stewardship Code 2020. This Code sets the highest standards for asset owners, asset managers and for the service providers that support them. As an asset owner managing assets on behalf of our customers, we take our responsibility very seriously,” an Aviva spokesperson said.

Asset owners and managers that didn’t submit their final reports by these dates now have until October 31 2021 if they want to be considered as signatories of the updated code.

From 2022, all organisations have the option to submit future reports by April 30 or October 31, depending on which deadline works best according to their respective reporting cycles, the FRC told ESG Investor.

“Some asset owners have indicated that they intend to submit a report to the FRC by the October deadline, rather than the April deadline, as this date better aligns with their existing reporting cycles,” a spokesperson said, adding that the rate of submissions to date was “broadly in line” with expectations.

The UK Stewardship Code was updated in 2020 to better account for the changes the investment market has gone through since the publication of the first code in 2012. Chief among these changes is the increasing priority placed on environmental and social factors.

“Environmental, particularly climate change, and social factors, in addition to governance, have become material issues for investors to consider when making investment decisions and undertaking stewardship,” according to the 2020 Stewardship Code report.

The Code doesn’t prescribe a single approach to effective stewardship, but rather expects organisations to meet the expectations in a way that best aligns with their existing business strategy.

“We encourage asset owners to become signatories to the Code and require their investment managers and service providers to become signatories to the Code. We continue to engage with asset owners to communicate our expectations and answer any questions they have about doing so. In addition, we are involved in relevant industry and regulatory initiatives to encourage and support asset owners to become signatories,” the FRC spokesperson said.

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