FRC Toughens Up Stewardship Code for Asset Managers in Britain

According to a latest proposal set out by regulators on Wednesday, Britain asset managers must have a proper explanation for how they selected sustainable investments beneficial for society, clients and the environment.

The Financial Reporting Council (FRC) has rolled out some revisions to beef stewardship code, which is followed by proxy advisers, asset managers, investment consultants and pension fund trustees on a ‘comply or explain’ basis. The council has hard pressed a sector already witnessing ‘value for money’ drive from regulators.

The revisions have brought substantial alterations to drive asset managers to consider social, environmental, and governance factors clearly at the time of investing. This may include the treatment of customers and suppliers of firms they are investing in, and climate change.

As per the revision, asset managers need to mention their culture policies and value and must report how their actions achieved them publically, every year.

While speaking to media, FRC director of corporate, David Styles called the latest decision a substantial change. Styles added that according to them the code is likely to be as groundbreaking as it was when they introduced the first one. He added that there is no need to sign up, as the ones seeking long term responsible investment should do so.

A final version of these revisions will be published in July, as until March these revisions will be put to public consultation. Previously revised in 2012, the code is dissimilar to the corporate governance code, which directors of companies have to follow.

With the current code, the FRC has left the industry tangled by classifying companies into two tiers to specify partial and full compliance with the code.

The FRC is also looking forward to expand the code beyond investments in mentioned companies to include myriad assets such as infrastructure, private equity, fixed income, and bonds, to reflect the rapidly altering nature of investments.

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