It is not easy to become a signatory to the UK Stewardship Code. It is a rigorous process that requires companies to evidence their approach and commitment to stewardship.
White Marble has provided consultancy to a raft of asset managers large and small over the past three Financial Reporting Council stewardship reporting periods.
We also have a 100% success rate of helping clients gain signatory status (including those that have previously fallen short).
During these projects, we find several queries come up again and again. Below, you can read some of our recommendations.
If you’d like to chat further about our tried and tested approach to stewardship submissions, get in touch here.
Q: How much time and resource should we be putting towards this?
A: If you are a business genuinely trying to build a reputation and investment capability centred on stewardship, then the UK’s signatory status remains a litmus test of your commitment.
In this scenario, we would suggest a significant amount of time and resource be targeted towards applying for and securing your FRC accreditation.
The firms we have worked with over the past couple of years, whom now have a tried-and-tested approach, tend to kick off their resubmission work at the end of the calendar year. That gives them four clear months - once they’ve identified the areas requiring most attention - to cascade the information requests across the business, collate the content they need, implement the updates, gain various levels of approval from stakeholders, and then design and layout the final report.
Of course, resubmissions (and even first-time submissions) can be pulled together in a shorter timeframe, but that leaves little wiggle room and could leave you vulnerable to last-minute panicked requests for additional resource.
We have supported clients from as early as November and as late as the end of March for April submissions. But we always recommend getting in touch with us as early as possible.
Q: What matters more – the journey or the destination?
A: From what we have seen, reviewed, and discussed with our clients and networks, a key takeaway has been that the FRC is looking for evidence of your intention towards and evolution of stewardship. Even for those who believe they have achieved the ‘gold standard’ of stewardship (which is, after all, a subjective concept) in any given reporting period, the reality is the goalposts keep moving.
Revisions to the UK Stewardship Code were last made in 2019 and applicable from January 2020. Previous updates were made in 2012, just two years after the code’s launch. Given the rise in prominence of sustainable investing and that the pace of change has built considerably over the past decade, we expect updates from the FRC to be more regular from now on.
While we do not know what subsequent updates might hold in store, one thing we expect to remain consistent is the emphasis placed on transparency and reflection. In our experience, the FRC recognises that neither the world nor our industry, and therefore none of its constituents, are perfect.
That is why they prize openness in the case studies and evidence shared, and a spirit of genuine improvement driven by lessons learned from those instances that stewardship activities or outcomes fall short of stellar.
If asset managers can demonstrate:
- how they try to formalise their approaches to stewardship, and why,
- how they have documented/are documenting their processes,
- how they follow these processes to the best of their ability/applicability; and
- how they bake in reviews and subsequent bolstering of their governance frameworks and processes to improve them over time…
…this is imminently preferable to submitting a report that skimps on detail, infers process and rigour without evidencing it and sets the applicant up as a paragon of stewardship with nothing left to learn.
Q: How long/short should it be and does design matter?
A: Every conversation we have with clients about stewardship reporting eventually turns to this query. It usually stems from a dual concern around wanting to be thorough and detailed enough while ensuring the report doesn’t run the length of a small novel and remains digestible.
For different businesses length will vary. For a global asset manager with strategies across the full spectrum of asset classes and markets, the area they are required to cover is understandably broad and the FRC prefers to see case studies and examples representative of the profile of the business.
Meanwhile, smaller or more focused firms might find they can fulfil the required detail in less than half the length. We have seen reports ranging from 25 pages in length to a whopping 138 pages. And while we wouldn’t recommend the latter, we firmly believe that using narrative structure, layout and design devices to help the reader navigate the report and find the most pertinent information is what matters most.
Another trend we have noticed is that of some asset managers using their firmwide sustainability report as their stewardship submission – something we would definitely advise against.
But that’s a topic for another day…
Good luck to all those working towards the end of April deadline, it’s not too late if you would like our help. Get in touch today.