The Financial Reporting Council (FRC) is undertaking a review of the UK Stewardship Code 2020 and expects to publish its revised code in early 2025.

As part of its review, the FRC is seeking views from all stakeholders on whether the current format of the code is being used by asset managers and owners in a manner that drives better stewardship outcomes from engagement with issuers across all asset classes.

The code, which was last revised in 2019, aims to safeguard the interests of pension holders though the promotion of transparency and accountability.

Its principles are designed to encourage the alignment of incentives through the investment chain for the benefit of pension scheme members and other investment beneficiaries.

The FRC published its revised Corporate Governance Code earlier this year and, following feedback during the consultation process, decided it was now an “opportune moment” for a fundamental review process to ensure the principles are still driving the right stewardship outcomes for investors while not “unduly contributing” to reporting burdens.

Its review of the UK Stewardship Code will focus on, among other things, the extent to which the code supports long-term value creation though appropriate investor-issue engagement that drives issuers’ prospects and performance.

Additionally, it will assess whether the code creates reporting burdens on issuers and code signatories, and if it has led to any untinended consequences, such as short-terminism in targets and outlook for issuers.

The first phase will be a ‘targeted outreach’, focused around the four main groups (issuers, asset managers, asset owners and service providers) affected by the code’s principles and application, and the FRC said it expected these discussions to uncover “a range of issues” that will inform the second phase.

Its second phase will be a public consultation, which is planned to launch after the 2024 AGM voting season, with the revised code expected to be published in early 2025.

“We recognise the need to engage closely with other regulators who also have an interest in the operation of this code,” the FRC stated.

“Approximately one third of the total assets under management of signatories are invested in both UK and global listed equity and two thirds in other asset classes.

“Other assets include fixed income, private equity, real estate and infrastructure and others. The significant international interest in the code is reflected by the two fifths of signatories who are head-quartered outside of the UK.

“The current code will operate as usual throughout the review process, with existing signatories required to submit their renewal application to remain a signatory.

“Once the revised code is updated, the FRC will set out a clear implementation pathway and ensure the effective date allows current signatories sufficient time to respond to any changes.”

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