High Pay Centre ‘Stewardship Code’ consultation submission

By 01.04.19PublicationsAugust 27th, 2020No Comments

HPC has issued our response to the Financial Reporting Council’s consultation on the new Stewardship Code

HPC’s response to the Financial Reporting Council’s consultation on the new Stewardship Code sets out our view on the standards that should be set for investors, in terms of their oversight of the assets they invest in.

Investors have considerable power over the practices of the companies that they buy shares in or lend money, including their approach to pay issues and their broader environmental and social impact. Therefore, the new Code is critically important. We found much to welcome in the draft published by the FRC, including:

  • the specific emphasis on the consideration of ESG factors in investment and stewardship practices;
  • the specific provisions and guidance for different types of investment professionals (asset owners, asset managers and service providers);
  • the increased scope of the code in terms of asset classes beyond listed equities;
  • the inclusion of provisions relating to engagement with the ultimate beneficiaries of investments;
  • the emphasis on organisational culture;
  • and the responsibility for signatories to deliver sustainable value for wider society.

At the same time, there are a number of simple measures that would considerably strengthen the code and better align the practices of the investment industry with the interests of wider society. These include:

  • requiring investors to report on their policy for measuring their social and environmental impact, potentially using the Sustainable Development Goals as a framework for measuring impact;
  • mandating asset managers to provide better disclosure of both the size and structure of pay packages for their employees, as part of the new requirements on culture and values
  • providing much more detailed requirements for investment consultants and proxy advisers, which play a critical role in good stewardship, but are currently treated as something of an afterthought.

We hope to see these suggested amendments when the final version of the code is published in Summer 2019.

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