The revised Code is likely to encourage a more robust and substantive review of ESG issues by institutional investors.
The UK Stewardship Code (the Code) was originally published in 2010 following a review of corporate governance. The Financial Reporting Council (FRC) has responsibility for the Code, and promotes the long-term success of companies, outlines principles underlying an effective board, and fosters active investor monitoring and engagement of companies. All UK-authorised asset managers are required to produce a statement of commitment to the Code or to explain why the Code is not appropriate for their business model (the “comply or explain” approach discussed below). As such, there are 305 signatories to the Code, which primarily include asset managers and asset owners (pension funds, endowment funds, and charities).
The Code was last revised in 2012, and the FRC notes that there have been significant changes in the interim. In particular, legal and international developments concerning ESG issues and legal developments concerning the application of ESG issues in the context of trustees’ fiduciary duties (including pension trustees). For more information on ESG issues, please see Latham’s previous blogs here and here. Continue Reading