FRC sets out details and timeline for its review of the UK Stewardship Code

The Financial Reporting Council (FRC) has recently published a policy update in relation to its review of the UK Stewardship Code. Its fundamental review is intended to ensure the Code supports growth and the UK's competitiveness. The FRC will seek views from all stakeholders on whether the Code is being used by asset managers, asset owners and other signatories to the Code in a way that drives better stewardship outcomes from engagement with issuers across all asset classes. 

The FRC notes that the Code was last revised in 2019, and following feedback from its consultation on the UK Corporate Governance Code, it considers it clear that a fundamental review of the Code is required to ensure that its principles are still driving the right stewardship outcomes for investors while not unduly contributing to the reporting burdens 

The review will focus on, among other matters, the extent to which the Code:

• supports long term value creation through appropriate investor-issuer engagement that drives issuers’ prospects and performance;
• creates reporting burdens on issuers as well as Code signatories; and
• has led to any unintended consequences, such as short-termism in targets and outlook for issuers.

The review will be undertaken in three phases. The first phase will involve targeted outreach focusing on the four main groups affected by the Code's principles and application (that is, issuers, asset managers, asset owners and service providers). The second phase will be a public consultation (expected to launch after the 2024 AGM voting season during the summer months). The revised Code is expected to be published in early 2025.

The FRC expects to engage closely with other regulators who have an interest in the operation of the Code, including the FCA, the DWP and the Pensions Regulator. 

To note, the current Code will operate as usual through the review process (with existing signatories required to submit their renewal application to remain a signatory). Once the revised Code is updated, the FRC have said it will set out a clear implementation path and ensure the effective date allows current signatories sufficient time to respond to any changes.