Simon Jones, Head of Responsible Investment at Hymans Robertson responds to the FRC’s consultation on strengthening the Stewardship Code:

“It is absolutely right that the FRC has set substantially higher expectations for stewardship within the updated Code. Responsible investment is an area of continually growing importance across our client base; the concepts of Sustainable Investment, recognising the potential financial impact of Environmental, Social and Governance factors, and Effective Stewardship underpin our thinking. Best practice in stewardship begins with strong governance structures, coupled with clearly defined objectives and beliefs.  Requiring that signatories not just address the operational aspects of stewardship, but demonstrate how their approach is supported by the culture and values of the organisation is therefore welcome.  

“Whilst we support the consultation, we believe that there are areas where the FRC can go still further, considering how the clients and beneficiaries of signatories can best understand the approach being taken.  Standards for disclosure on issues such as voting policy and voting records would be a sensible step forward although, as the Code recognises, there are risks in being overly prescriptive.  As signatories get to grips with reporting requirements, we believe it appropriate that the FRC allow best practice to emerge over time, so avoiding a ‘tick box’ approach to stewardship.

“As an investment consultant with an important role to play in helping our clients develop their approach to responsible investment, recognising the role of Service Providers as a distinct category of signatory is sensible.   However, we believe it is appropriate for signatories to be clear on the basis on which they are signatories to the Code.  For example. where consulting firms also provide fiduciary management services, the FRC should require that they demonstrate compliance in each category for which they operate, thus ensuring that these separate roles remain distinct.”

Click here to read our full consultation response