The Investment Association published its response to the FRC consultation on the proposed new stewardship code, which welcomes the broad direction of travel but highlights several key areas where the proposed code falls short of creating the better market for stewardship that shareholders want.
Responding to the FRC consultation on the proposed new stewardship code Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association, said:
“The UK is a world leader when it comes to corporate governance, but there is more that can be done to create a better market for stewardship. Effective stewardship not only provides long-term, sustainable returns for savers and investors but done effectively can also provide wider benefits to society and the economy.
“The proposed code sets out a generally positive direction of travel, outlining important changes on the expectations of stewardship, such as a focus on the role of asset owners and managers and the integration of environmental, social and governance factors into the investment process. Unfortunately, the implementation of the new Code falls short on several key areas that are crucial to building a better stewardship market. If these concerns are not addressed, then they will hamper the development of a stewardship market that delivers for savers and investors as well as for the wider economy.
“While we support the proposal for an ‘Activities and Outcomes’ report, we believe that it is too focussed on stewardship policies and does not place enough emphasis on stewardship outcomes. We are very supportive of a ‘show, don’t tell’ model, with a much stronger focus on the impact of stewardship, rather than the processes that sit behind it."
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