The Financial Reporting Council (FRC) should reference the new Financial Conduct Authority (FCA) backed Vote Reporting Group (VRG) template as a standardised tool for voting disclosures, as it finalises its updated UK Stewardship Code, the UK Sustainable Investment and Finance Association (UKSIF) has urged.
Last year, the FRC announced it was undertaking a fundamental review of the UK Stewardship Code, with the final draft being published on 3 June, prompting questions over whether the revised guidance was still fit for purpose.
The Code is part of the investment stewardship eco-system in the UK, safeguarding the interests of the public and pension holders by promoting transparency and accountability, and is also adopted by global investors.
UKSIF is calling for references to be considered for the work of the FCA’s independent VRG and specifically the newly established industry-led voting disclosure template that is under the ownership of Pensions UK (formerly the Pensions and Lifetime Savings Association).
This, the Association noted, would enhance transparency and standardisation in voting disclosures.
Oscar Warwick Thompson, UKSIF’s head of policy and regulatory affairs, said: “We hope that the Stewardship Code guidance, which in its current draft form has generally been well-received by our members, can help meaningfully reduce the potential reporting burden incurred in the short-term for signatories and the additional costs associated with the new reporting requirements.”
He added that UKSIF would like to see the finalised guidance “help reinforce the Code’s expectations to signatories and prospective signatories that a high-quality standard for investor stewardship practice and stewardship reporting under the revised Code remains in place in the UK’s market”.
Warwick Thompson stated: “This will be a very important message to convey to our industry, given the perception from some of our members that the revised Code has, in some respects, experienced some dilution in terms of its overall ambition and role as an effective accountability mechanism for good stewardship among investors.”
Earlier this year, Pensions UK announced it had taken on the vote reporting template of the VRG – a group convened by the FCA – merging it with elements of its existing template to create a new updated resource.
According to UKSIF’s response, the new template, which has been under development for several years with support from the FCA and a wide range of industry participants, including UKSIF, could be highlighted to signatories as an example of a standardised industry template to report on summary voting information.
“Our expectation is that the template will be fully operational early next year and referencing this could usefully highlight to signatories the existence of an industry-wide solution aimed at encouraging more consistent, decision-useful vote reporting to the benefit of clients and beneficiaries,” UKSIF stated.
Pushback
Since the FRC launched its review of the Code, the group has had to defend its changes to the Code’s definition. Earlier this year, signatories pushed back against the proposals to drop explicit references to ‘environment and society’ in the new definition of stewardship, among others.
Speaking to IPE, Catherine Howarth, chief executive officer of ShareAction, criticised the FRC for further lowering the bar at a time of weakening support for shareholder resolutions.
“At a time when major institutional investors have been retreating from ambitious stewardship, as evidenced most visibly by the weakening of support for shareholder resolutions, it was a shame to see the FRC’s Stewardship Code lower the bar further.”
She added: “This does nothing to help pension savers who rely on signatories of the Code to act as their steward. ShareAction particularly regrets the FRC’s decision to remove from the Code the principles on Collaborative Engagement and Escalation.”
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