In January 2019, jointly with the Financial Reporting Council (FRC), we published a Discussion Paper, Building a Regulatory Framework for Stewardship (DP 19/1). This Feedback Statement (FS) responds to the views we received, within the scope of our regulatory responsibilities.
DP 19/1 examined what effective stewardship should look like, what the minimum expectations should be for financial services firms that invest for clients and beneficiaries, the standards the UK should aspire to, and how to achieve them.
Since DP 19/1 was a joint Discussion Paper, we have coordinated with the FRC in framing our future work. Continued close engagement and coordination will be important.
The FRC has separately used the feedback to DP 19/1 in its work to revise the UK Stewardship Code, on which it consulted in parallel.
The UK Stewardship Code 2020 has also been published today.
A key focus area in DP 19/1 was the balance between the regulatory baseline for effective stewardship and promoting higher standards through the FRC UK Stewardship Code 2020. We will take steps to put appropriate arrangements in place with the FRC – and its successor – to support this.
Who this affects
This Feedback Statement is relevant to FCA-regulated asset management firms and life insurers and other asset owners and investor. It will also affect public companies, issuers of debt and their advisors, and current and future signatories to the UK Stewardship Code.
It may also be of interest to a wider range of stakeholders, including service providers, such as proxy advisers and investment consultants, policy-makers and regulatory bodies, and a variety of other stakeholders such as industry groups, trade bodies, consumer and civil society groups, commentators, academics and think tanks.
Actions and next steps
We agree with the view of most respondents to DP 19/1 that we should not impose further stewardship-related requirements on life insurers and asset managers now. We also agree that we should let firms first adapt to our new rules on shareholder engagement (implementing the revised Shareholder Rights Directive (SRD II)), which took effect in June 2019, and other related measures.
We have, however, identified several things we should do, working with industry, the FRC, Government and other regulators, to help address some remaining barriers to effective stewardship. Our actions build on existing initiatives, some of which were announced in our Feedback Statement on climate change and green finance (FS19/6). They include:
- Examining how asset owners set and communicate their stewardship objectives and taking actions to promote arrangements between asset owners, asset managers and service providers that support these objectives.
- Helping to address regulatory, informational and structural barriers to effective stewardship practices, including by consulting on rule changes to enhance issuers’ climate change disclosures.
- Considering further the role of firms’ culture, governance and leadership in both the management of climate risks and the exercise of stewardship.
- Pursuing a number of actions to promote better disclosure of firms’ stewardship practices and outcomes.
We will consider the need for any further actions as the UK Stewardship Code 2020 takes effect, so that the regulatory framework continues to support effective stewardship.