The proposed initiative would embed sustainability in companies’ corporate governance frameworks and their business strategies.
By Paul A. Davies and Michael D. Green
On 26 October 2020, the European Commission (the Commission) launched a public consultation on a proposed sustainable corporate governance framework. The Commission is seeking views from a broad range of stakeholders, including, in particular, businesses and their directors as well as investors, environmental organisations, and public authorities that may have a role in supervising the new rules.
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).