UK - Two more heavyweight institutions have joined the numbers warning that the Financial Reporting Council (FRC) should take care in designing the practical workings of its new Stewardship Code for institutional investors.
The FRC is currently carrying out a consultation exercise on the Code, which has already received mixed reviews (see earlier IPE story: Stewardship Code continues to receive mixed views on governance).
Now the NAPF has warned that the code must not develop into just a compliance exercise, with no tangible benefits for investors.
David Paterson, head of corporate governance at the NAPF, said: "It is vital there is widespread acceptance of the code and that its application is not merely a 'tick box' compliance exercise. Over time, we must see strong stewardship becoming an integral part of the assessment of investment managers by pension funds."
Paterson said: "The code is a welcome and necessary step towards better defining the responsibilities of investors. However, there is significant work to be done in ensuring its practical application."
To ensure the code is widely adopted, the NAPF said the FRC must concentrate on three key objectives: encourage widespread adoption of the code by institutional investors; significantly improve dialogue between issuers and investors; encourage the development of much higher standards of monitoring and reporting by investors.
Meanwhile, the IMA has called for flexibility in any revised code that emerges from the consultation.
Liz Murrall, director of corporate governance and reporting at the IMA, said: "Our members invest money on behalf of their clients and their aim is to achieve satisfactory returns which they can do in different ways. Some follow the principles in the Stewardship Code and seek to effect change at investee companies, whereas others send a message to a company's management through selling the shares."
Murrall said: "It is important that different approaches to investment are recognised and that the code remains flexible, particularly as regards measures for monitoring and verifying adherence."
She said that regular IMA surveys that monitored adherence had shown that stewardship activity had evolved over the past few years, becoming more transparent.
The IMA is now discussing with the FRC how - with suitable development and the introduction of independent oversight - the survey could be used as an effective mechanism for monitoring the code's application.