We’re signing the UK Stewardship Code 2020. Are you?

We’ve seen a major shift in priorities and attitudes in the UK investment industry in the last few years. Conversations about climate change, diversity and corporate purpose have become commonplace. Now it’s time for the industry to follow through with action that is commensurate with the scale and pace of change.

The Financial Reporting Council’s rewritten UK Stewardship Code promises to be an important catalyst for such action. It signals greater recognition of the role that investors play in shaping the future of our society and hence the importance of managing money responsibly for the long-term. To demonstrate our support, we have already committed to signing the 2020 Code^[1] and encourage others to do so too.

We welcome the 2020 Code and its step-change in expected stewardship standards. Its new definition of stewardship encourages a more holistic mindset that seeks to safeguard the long-term health of the financial system, not just address issues affecting individual companies:

Stewardship is the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

The Code emphasises that asset owners – such as the pension trustees, charity trustees and other investors advised by LCP – have an important role in allocating capital and overseeing the broad range of investment activities carried out on their behalf. And the investment rationale is clear – laying the foundation for strong returns in 5 or 10 years (and beyond) starts with good stewardship today. 

We’ll therefore be helping our clients to apply the Code’s principles, with further support for those who want to become signatories in their own right. We will:

• Encourage our clients’ investment managers to sign the 2020 Code.
• Deepen the stewardship due diligence in our manager research, pushing for managers to improve where necessary (particularly those non-equity managers who view stewardship as primarily relating to equities).
• Assist our clients in addressing systemic concerns such as climate-related risks through our asset allocation and other advice.

Everyone in the investment chain has a responsibility to exercise stewardship. That’s why I believe asset owners should expect their advisers (as well as their investment managers) to sign the Code and then hold them to account for that commitment.

Stewardship is a vital element of our response to the challenges and expectations of modern society. By looking after the long-term health of the economic, social and environmental systems on which financial markets – and hence investment returns – depend, it will help us create long-term value for our clients and their beneficiaries.

We are raising our game and call on others to do the same.

You can learn more about the 2020 Code in our briefing note.

[1] Subject to the FRC’s approval of our first annual Stewardship Report which we will submit by the 31 March 2021 deadline.