The deadline is looming for companies to register for the new UK Stewardship Code 2020, which recognises the need for high standards when dealing with customer deposits and investments.
Financial services companies that invest money on behalf of UK savers and pensions have until 31 December 2019 to apply. With the Christmas break, this gives them just under four weeks.
The Code will take effect on 1 January 2020. It tightens up existing regulations and establishes a clear benchmark for stewardship. It requires companies make responsible decisions on the allocation, management and oversight of capital. They must aim to create long-term value for clients and beneficiaries, resulting in sustainable benefits for the economy, the environment and society.
In the new code, which is a revision of one established in 2012, there is a strong focus on the activities and outcomes of stewardship, not just policy statements.
The Stewardship Code was revised following a consultation that closed on 29 March 2019. It is overseen by the Financial Reporting Council, an independent regulator in the UK and Ireland, responsible for regulating auditors, accountants and actuaries, and setting the UK's Corporate Governance and Stewardship Codes.
There are new expectations about how investment and stewardship is integrated, including environmental, social and governance issues. The Code asks investors to explain how they have exercised stewardship across asset classes. For example, for listed equity, fixed income, private equity, infrastructure investments, and in investments outside the UK.
The Code consists of 12 Principles for asset managers and asset owners, and six Principles for service providers. These are supported by reporting expectations, which indicate the information that should be publicly reported in order to become a signatory.
Organisations wanting to become signatories to the Code will be required to produce an annual Stewardship Report explaining how they have applied the Code in the previous 12 months. The FRC will evaluate reports and those that meet the reporting expectations will be listed as signatories to the Code. To be included in the first list of signatories, organisations must submit a final report to the FRC by 31 March 2021.