FRC (UK) strengthens Stewardship Code to targets climate disclosure

Source: , 30 January 2019

The Financial Reporting Council (FRC) is consulting on a new Stewardship Code that sets substantially higher expectations for investor stewardship policy and practice. The Code will focus on how effective stewardship delivers sustainable value for beneficiaries, the economy and society. The new Code aims to increase demand for more effective stewardship and investment decision-making which is better aligned to the needs of institutional investors’ clients and beneficiaries.

The proposed main changes to the Code include:

  • Purpose, values and culture. Investors must report how their purpose, values and culture enable them to meet their obligations to clients and beneficiaries. This aligns the Code with the UK Corporate Governance Code and encourages embedding behaviour conducive to effective stewardship in the investor community.
  • Recognising the importance of ESG factors. The proposed Code now refers to environmental, social and governance (ESG) factors. Signatories are expected to take material ESG issues into account when fulfilling their stewardship responsibilities.
  • Stewardship beyond listed equity. The proposed Code now expects investors to exercise stewardship across a wider range of assets where they have influence and rights, in the UK and globally.

The proposed 2019 Code sets out more rigorous requirements for reporting, focusing on how stewardship activities deliver outcomes against objectives. Reporting will be subject to increased oversight by the FRC to ensure the Code is effective in raising the quality of stewardship across the investor community.

In preparing the consultation the FRC has engaged with 170 members of the investment community and companies, including the largest UK asset managers, pension funds, key international investors and UK listed companies.

Sir Win Bischoff, Chair of the Financial Reporting Council said:

“The new Stewardship Code will play a key role in complementing the stronger corporate governance provisions that took effect at the start of this year. The FRC conducted extensive outreach in early 2018 to inform this review of the Stewardship Code. It recognises the significant changes in the investment industry and stewardship landscape since the 2012 revision. It sets both higher expectations for stewardship practice and introduces more rigorous public reporting with a focus on outcomes and effectiveness We believe the changes proposed put it at the forefront of stewardship internationally.”

Comments on the questions set out in this consultation document are requested by 29 March 2019. Responses should be sent to

Today, the FRC and the Financial Conduct Authority (FCA) are also publishing a discussion paper Building a regulatory framework for effective stewardship to advance the discussion about what effective stewardship should look like, expectations for financial services firms, and how this can be best supported by the UK’s regulatory framework.

The FRC’s mission is to promote transparency and integrity in business.  The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

Download the code (pdf)