Consultation on updates to the UK Stewardship Code - 2024/25
On 11 November 2024 the Financial Reporting Council (FRC) launched its consultation on significant updates to the UK Stewardship Code.
Key proposals in the consultation include:
- A revised and enhanced definition of stewardship that emphasises the need to create long-term sustainable value for clients and beneficiaries as a key outcome of good stewardship
- A streamlined reporting process separating policy and activity disclosures to reduce reporting burdens
- Targeted principles for different types of signatories and service providers
- New guidance to support effective implementation and help signatories with the transition to the new reporting arrangements
The deadline for responding to the consultation is 19 February 2025. AREF appreciates that there are some challenges with stewardship reporting in relation to real estate and will be responding to the consultation. This will be supported by AREF's Public Policy Committee and ESG & Impact Investing Committee. Any members who would like to contribute to AREF's response should advise Jacqui Bungay, Head of Policy ([email protected]).
Review of the UK Stewardship Code - 2024
In July 2024, the Financial Reporting Council (FRC) committed to the following five priority areas of review as it continues its revision of the UK Stewardship Code:
- Purpose – The FRC will consider all stakeholder views and set out its expectation of what defines effective stewardship, what this looks like in practice, and how reporting against the Code can help to deliver this.
- Principles – The FRC is considering what reporting will be necessary to deliver on a renewed purpose of the Code.
- Proxy Advisors – The FRC will carefully consider how the Code might support greater transparency of their activities.
- Process – The FRC will take forward proposals to reduce the reporting burden currently associated with being a Code signatory and ensure that information included in reports is useful and accessible to all underlying investors and other stakeholders.
- Positioning – The FRC is working closely with other regulators such as the DWP, TPR and the FCA to support clarity in understanding the revised Code and its successful implementation. The Code will continue to support the objectives of those other regulators to avoid any confusion and duplication that signatories may encounter.
The FRC plans to launch a formal public consultation on the Code in late 2024. Prior to this the FRC will be undertaking further focussed engagement with its stakeholders on the five topics listed above.
Reporting changes to the UK Stewardship Code - July 2024
In July 2024, the FRC announced that they were making the following five immediate changes to significantly reduce the reporting burden on existing signatories to the UK Stewardship Code:
- Remove the requirement to annually disclose all ‘Context’ reporting expectations, except for new reports or material changes.
- Remove the requirement to annually disclose against ’Activity‘ and ’Outcome‘ reporting expectations for some Principles.
- Explicitly allow use of content from previous reporting and cross-referencing of such reports.
- Set clear expectations of what is considered an ‘outcome’ for stewardship purposes.
- Emphasise the ability to exercise reporting against Principles 10, collaborative engagement, and 11 escalation ‘where necessary’.
This provides clarity on areas signatories outlined as challenging to address, reduce the volume of reporting and provide flexibility for signatories in defining how they undertake stewardship. The reporting changes will apply for the application window 31 October 2024.
AREF Webinar: An Introduction to The Stewardship Code - February 2021
In February 2021, AREF held an interactive roundtable session with members introducing The Stewardship Code. The event was aimed at AREF members who were less familiar with the Code and were deciding whether they would like to become signatories. Expert speakers discussed some of the challenges of reporting on real estate, including the opportunities for different fund structures and looking at ESG risk exposure and impact. More details can be found here.
UK Stewardship Code 2020
The UK Stewardship Code 2020 took effect on 1 January 2020 and sets high expectations of those investing money on behalf of UK savers and pensioners. It defines stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
You can find more information on the FRC Stewardship Code webpage.
The FRC has published a Review of Early Reporting to the Stewardship Code. The purpose of the Review is to support prospective signatories in meeting this new reporting requirements.
Consultation and Discussion Paper 2019
The Stewardship Code was revised following a consultation which closed on 29 March 2019. To find out more about the consultation and read the Feedback Statement, please click here.
In January 2019, the FRC and the Financial Conduct Authority (FCA) published a Discussion Paper, Building a regulatory framework for effective stewardship (DP 19/1). The FCA has published a Feedback Statement in response to the feedback.
Member event
View materials from the member roundtable 'Introduction to the Stewardship Code - for the Real Estate Industry' held on Wednesday 24th February 2021.
Author
