UK Conduct Regulator Publishes Feedback on Regulatory Framework for Stewardship Discussion Paper

The U.K. Financial Conduct Authority has published a feedback statement on the discussion paper, “Building a regulatory framework for effective stewardship” that it published in January 2019 together with the Financial Reporting Council. The discussion paper called for input on how best to encourage the capital markets community to engage more actively in “stewardship” of the assets in which they invest. The term “stewardship” broadly refers to the responsible allocation and management of capital by institutional investors in order to create sustainable value for beneficiaries, the economy and society. The FCA’s feedback statement will be of particular interest to those engaged in stewardship, including FCA-regulated asset managers, signatories to the U.K. Stewardship Code and issuers of debt and their advisors.

The feedback statement sets out the broader context of the discussion paper, including the implementation by U.K. regulators (including the FCA) of the second Shareholder Rights Directive, the FRC’s implementation of the UK Stewardship Code 2020 and the various sustainable finance initiatives being undertaken at a U.K. and EU level. Respondents to the discussion paper did not believe that further stewardship-related requirements should be imposed on life insurers and asset managers. However, most agreed with the key attributes of effective stewardship proposed in the discussion paper and that the FCA should take a system-wide approach to stewardship.

The FCA intends to take the following actions in response to the feedback it has received:
 

1. Holding an industry workshop in Q1 2020, together with other regulators, to establish a clear purpose for stewardship, including a consideration of how assets owners communicate their stewardship objectives to asset managers and service providers;
2. Engaging with the Investment Association to consider how best to promote a long-term perspective in investment mandates;
3. Issuing a consultation on the Competition and Markets Authority’s proposal that investment consultants be brought under FCA regulation; it will also consider stewardship in its design of a regulatory regime for such consultants;
4. Continuing to identify areas of concern and to provide clarification in respect of the Market Abuse Regulation;
5. Issuing a consultation in early 2020 on proposals for new ‘comply or explain’ rules on climate change-related disclosures by certain listed issuers;
6. Considering the roles of proxy advisors, providers of environmental, social and governance data services and nominees that hold securities and their impact on stewardship;
7. Continuing to consider firms’ culture, governance and leadership in managing climate change risks; and
8. Promoting better disclosure of firms’ stewardship practices and outcomes, including through its support for the implementation of the UK Stewardship Code 2020 and its consideration of how to enhance climate change disclosures by regulated firms.

View the FCA's feedback statement.

View details of the Discussion Paper on Building a framework for effective stewardship.

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