The Financial Reporting Council (FRC) has categorised signatories to the Stewardship Code into tiers based on the quality of their Code statements.

According to the FRC, the assessment demonstrates much improved reporting against the Code and greater transparency in the UK market.

There are nearly 300 signatories to the Code, with 120 in Tier 1, an increase from approximately 40 at the beginning of the exercise. This represents nearly 90% of assets under management of members of the Investment Association.

The assessments focused on the quality of descriptions of signatories’ approach to stewardship and their explanations in accordance with the “comply or explain” basis of the Code. More than 200 signatories approached the FRC to discuss improving their reporting against the Code.

Asset managers who have not achieved at least Tier 2 status after six months will be removed from the list of signatories, as their reporting does not demonstrate commitment to the objectives of the Code. The FRC welcomes contact from signatories, particularly those in Tier 3, to discuss improvements to reporting.

Signatories to the Code have been tiered according to the quality of the reporting in their statements based on the seven principles of the Code and the supporting guidance. Asset managers have been categorised in three tiers, and other signatories in two tiers.

Tier 1
Signatories provide a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary.

Tier 2
Signatories meet many of the reporting expectations but report less transparently on their approach to stewardship, or do not provide explanations where they depart from provisions of the Code.

Tier 3
Significant reporting improvements need to be made to ensure the approach is more transparent. Signatories have not engaged with the process of improving their statements and their statements continue to be generic and provide no, or poor, explanations where they depart from provisions of the Code.

Stephen Haddrill, CEO of the FRC said: “Constructive engagement between investors and companies is vital for the long-term success of our economy. Investors play a crucial role in encouraging companies to think more about their long-term strategy. Reporting against the Stewardship Code is not a box-ticking exercise and signatories were encouraged to provide a clear description of their approach to stewardship, with explanations for non-compliance where appropriate. We will be looking for continuous improvement from Code signatories, but we are pleased with the response to this exercise and many signatories have reaffirmed their commitment to quality, transparent reporting and to stewardship”.