UK Stewardship Code Consultation: Proposals and Projections from the PPF and PLSA

Proposed definition: “Stewardship is the responsible allocation, management and oversight of capital, having regard to dependencies and impacts on the economy, the environment and society, to create long-term sustainable value for clients and beneficiaries.”

The PPF supports retaining references to the wider economy, environment, and society in the definition of stewardship, as systemic risks in these areas can impact long-term financial returns and member outcomes.

The PPF's proposed definition aligns with director duties under Section 172 of the Companies Act 2006, promoting clear alignment between directors and investors.

Proposed definition: “Stewardship is the responsible allocation, management and oversight of capital, having regard to dependencies and impacts on the economy, the environment and society, to create long-term sustainable value for clients and beneficiaries”. 

The PLSA supports retaining references to the wider economy, environment, and society in the definition of stewardship, as this emphasises the government’s commitment to the green transition and the importance of considering environmental and social factors.

The PLSA encourages the FRC to clarify the term “sustainable value” to avoid varied interpretations and potential greenwashing.

Both proposed definitions are identical, retaining reference to ESG factors.

The PPF emphasises the importance of clearly aligning directors with investors, whereas the PLSA notes clarification of the environmental impact.  

The PPF generally supports the proposal to streamline disclosures by reporting annually on activities and outcomes and disclosing triennially on policy and content (save for where there are fundamental/significant changes between these periods). 

However, the PPF emphasises that reports should be more user-friendly, and tailored to wider stakeholders' needs rather than simply being regulatory documents. 

The PLSA notes that that the proposal to report on policy only triennially could reduce the rigor and timeliness of stewardship reporting.

It also mentions that the additional flexibility for signatories (to determine what constitutes a fundamental/significant change) could be misused and lead to variance in the quality and content of stewardship reports.

The PLSA emphasises the need for ‘how-to-report’ prompts, to ensure a structured framework for comparability, and also noted the importance of consulting on accompanying guidance to ensure practical and effective implementation.

Combined response with Question 3.

Both emphasise reports being produced in an intuitive, user-friendly way. 

The PLSA queries the reporting timelines of three years and that, due to increased flexibility, the quality of reports may be compromised.

The PPF welcomes the introduction of ‘how to report’ prompts in the guidance and emphasises the need to maintain the current Code’s level of ambition. 

It suggests the FRC should consider market consultation or establish external working groups for practitioner input on draft documents.

It suggests that the Code should highlight the need for guidance on stewardship in non-listed asset classes, and that the FRC should provide feedback to signatories to address specific issues.

The PLSA supports the inclusion of ‘how to report’ prompts to ensure structured and comparable reporting.

The PLSA notes that the accompanying guidance is not proposed to be consulted on, which could lead to practical challenges and a lack of industry engagement.

Combined response with Question 2.

Both support the inclusion of ‘how to report’ prompts.

In terms of the further guidance, the PPF notes the need for guidance on stewardship in non-listed assets. Both emphasise the need for consultations/working groups to be arranged for all further guidance, to ensure it is practical and that the industry engages from the outset. 

The PPF supports recognising the distinct roles of direct/external market participants in the Code, but encouraged alignment between Asset Owners and Managers’ stewardship philosophies. It also noted that some Asset Owners manage meaningful direct engagement strategies despite not having internally-managed assets. 

It supports the 10% threshold for applying the Principles but encourages flexibility for Asset Owners and Managers to apply all Principles if they wish.

It supports the use of case studies to illustrate investments and work undertaken by managers, ensuring they are relevant to specific portfolios.

The PLSA supports having tailored Principles in the Code that apply differently to the distinct roles direct/external market participants.  

However, the PLSA encourages the FRC to be mindful of potential complexities arising from this approach, such as inconsistencies in reporting and increased resource allocation burdens.

The PLSA welcomes any support the FRC can provide to help signatories manage these potential challenges effectively. 

Both support having distinct Principles in the Code for roles direct/external market participants, but also propose some alignment in the respective philosophies, to avoid complexities.

Both also emphasise the need for flexibility for Asset Owners and Managers, alongside resources (e.g. case studies) to make the Principles user-friendly. 

The PPF considers the proposed structure an improvement by focussing on specific roles in the investment chain, expecting this focus to increase reporting quality.  

It encourages the FRC to engage with the Department for Work and Pensions (DWP) to harmonise reporting structures, achieving further efficiencies.

The PPF supports applying different Principles to those managing assets directly and those investing through external managers, as this will increase reporting quality. 

It also welcomes support from the FRC to create harmonised working structures. 

The PPF is generally supportive of the streamlined Principles.

It accepts the proposal to combine “collaborative engagement” and “escalation” into an overarching engagement Principle. 

It encourages the FRC to retain provisions relating to financial incentives aligning with stewardship aims.

The PLSA is generally supportive of the streamlined Principles.

However, it encourages the FRC to maintain a standalone escalation Principle: whilst reporting escalation activities under each relevant Principle could be effective, it notes that the phrase “wherever necessary” may provide too much flexibility and is open to interpretation.

The PLSA notes that merging the Principles of “engagement” and “collaborative engagement” may dilute the importance of engagement. It suggests including a specific “engagement outcomes” section.

Both are supportive of the streamlined Principles. 

Whereas the PPF accepts the combination of “collaborative engagement” and “escalation” into one Principle, the PLSA notes that the merged “engagement” Principle may dilute its importance. 

Similarly, the PLSA encourages the FRC to maintain a standalone escalation Principle. 

The PPF supports the ability to cross-reference publicly-available external information to streamline reporting and reduce duplication.

It emphasises the need to ensure that cross-referenced documents are accessible to all users, regardless of their role.

It suggests including summaries of cross-referenced documents within the stewardship report to maintain its standalone nature and provide useful information to readers.

The PLSA supports allowing signatories to cross-reference publicly-available external information to reduce the reporting burden, expecting this to help avoid unnecessary duplication and ensure effective stewardship reporting.

In terms of sources, it expects signatories to leverage information from various sources, such as annual reports, sustainability or ESG reports, proxy statements, regulatory filings, and public announcements.

Both support allowing signatories to cross-reference publicly-available information.

The PPF is more prudent on this point, emphasising the need for cross-referenced documents to be accessible and summarised, such that the stewardship document can maintain a standalone nature. 

The PPF has no concerns with the proposed schedule for implementation.

It suggests allowing additional signatory engagement before the first submissions to improve the quality of submissions and confidence in the process.

The PLSA considers the proposed implementation timeline for the updated Code may be potentially ambitious.

It notes the need for guidance to be developed, consulted on, and published alongside the updated Code in the first half of 2025, and emphasises the importance of providing sufficient lead time for signatories to familiarise themselves with the new Code before its implementation on 1 January 2026.

The PLSA also queries whether any new signatory applications before January 2026 will be subject to the 2026 Code.