The Financial Reporting Council (FRC) has been urged to ensure that its Stewardship Code ‘looks both ways’, towards scheme members as well as asset managers, for ongoing feedback and guidance.

Fintech firm Tumelo stated that very few pension schemes were engaging with members, despite the code inviting them to do so.

The company encouraged the FRC to go further with this aspect of the code to help deliver better standards of stewardship.

It argued that the code needs to do more to nurture two-way dialogue between companies and shareholders.

“While signatories are asked to ‘take account’ of beneficiary needs, the code needs to go further to ensure their voices are heard,” Tumelo said.

The Stewardship Code, which was launched in 2010 and updated in 2020, has almost 200 signatories across three categories.

Signatories are asked to submit an annual stewardship report to the FRC on how they have applied the code over the past 12 months, including how they sought the views of shareholders, beneficiaries and members.

According to analysis of 38 asset owners that have signed up to the code, the vast majority of which are pension schemes, few were actively engaged in ongoing dialogue with members on issues such as energy policy and executive pay.

“We are in a better place with the code than we would be without it – and now we’re urging the FRC to go further,” commented Tumelo CEO, Georgia Stewart.

“As an industry we must do more to hear from members on scheme policy, direction, and decisions, and the FRC is in a unique position to help via the code.

“It isn’t only about asking members what they think but playing back to them what trustees and asset managers are doing on their behalf and explaining how their views are affecting decisions. It’s about creating a sense of inclusion, engagement and influence.

“One scheme had invited its members to share their views on sustainable investing, but this was a highlight. Others are doing very little. In some cases, we could find no evidence of reporting to or engagement with member beneficiaries while, in others, there was, at best, a ‘transmit only’ mindset, with little effort to engage in a dialogue with members, gather feedback or measure outcomes.”

Tumelo also urged financial regulators to put shareholder engagement on the agenda and not take effective stewardship for granted, simply because the FRC code exists.

“This requires policymaker involvement too,” Stewart added. “The FCA and DWP, for example, must not assume that all is well because a stewardship code exists and because it has signatures on it. We need to go further and ratifying member engagement via policy shouldn’t be off the cards.”

Commenting, an FRC spokesperson said: “This is an important area of stewardship reporting. Where it is good, it explains not only the methods for beneficiary communication, but also the outcomes.

“This should include reflection and evaluation of how effective their communication has been, and how views have been taken into account, including any actions taken in response to beneficiary views. We will be reporting further on the quality of reporting in this year’s annual review.”

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