Esgaia supports UK Stewardship Code signatories in fulfilling their commitments

The Financial Reporting Council (FRC) recently introduced the updated UK Stewardship Code which sets high stewardship standards and expectations for those who invest on behalf of UK savers and pensioners. It consists of 12 Principles that asset managers and asset owners must report on to become a signatory. It does not prescribe a single approach on how to work with engagement, but rather to get organizations to increase their transparency on how they do it.

FRC released the latest list of signatories in September 2021. Out of the 189 applicants, only two-thirds (125) made the cut. According to FRC, most of the organizations that did not fulfill the criteria of becoming a signatory relied too heavily on policy statements. As such, the code put a lot of importance on reporting, displaying activities and outcomes, and not just high-level policy commitments.


Esgaia support investors' compliance with the UK Stewardship Code in multiple ways. Below, we outline key functionality that can help investors looking to become a or remain as signatory of the Code.


Principle 2: Governance, resources, and incentives


“Signatories should explain how they have appropriately resourced stewardship activities, including their investment in systems, processes, research, and analysis."


By using the Esgaia platform, signatories show they have invested in a system that enables a more structured approach to the engagement process. It helps improve efficiency, transparency and cooperation within investment organizations.


Principle 7: Stewardship, investment, and ESG integration


“The interaction between teams, including portfolio managers and ESG specialists, should be explained.”


The UK Stewardship Code highlights that signatories should explain how the interaction between different teams takes place. In our experience, many investors struggle with this collaboration and information sharing - achieving an efficient workflow where data is easily accessed with systematic records of interactions can be accomplished in a shared cloud-based environment, such as Esgaia's platform. Our platform enables effortless cooperation and information exchange between your relevant internal stakeholders.


Principle 9: Engagement


“Signatories should describe the outcomes of engagement that is ongoing or has concluded in the preceding 12 months, undertaken directly or by others on their behalf.”


The UK Stewardship Code strive for transparency and reporting exemplified through case studies, activities and outcomes. Esgaia's platform automates engagement statistics across funds or mandates for investors' stakeholder reporting. For example, using the Esgaia platform you are able to record your milestone progress and results of engagements. When you conclude a dialogue, you can link it to specific outcomes. This helps you keep track of what has happened in the targeted companies after the engagements, and what actions and activities they performed.


Figure: Example of engagement statistics to extract from Esgaia's platform.


Moreover, by logging all their activities (phone calls, meetings, site visits, etc.) and contacts on the platform, investors can view activity levels and contact summaries on our Statistics dashboard.

Figure: Example of engagement statistics to extract from Esgaia's platform.


Principle 12: Exercising rights and responsibilities


“... the Code encourages complete disclosure of listed equity voting records …”


One of the most common ways for investors to try and influence companies and exercise their rights as a shareholder, is by voting at AGMs. Also here, the updated Code is looking to improve transparency and accountability by demanding public voting records. To improve alignment between engagement and voting activity, it is possible to import voting data on the Esgaia platform. It enables a coherent overview and reporting of your active ownership activities, which can for example support investors' UK Stewardship reporting.


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Sources:

https://www.frc.org.uk/investors/uk-stewardship-code

https://www.frc.org.uk/getattachment/5aae591d-d9d3-4cf4-814a-d14e156a1d87/Stewardship-Code_Dec-19-Final-Corrected.pdf

https://www.frc.org.uk/getattachment/975354b4-6056-43e7-aa1f-c76693e1c686/The-UK-Stewardship-Code-Review-of-Early-Reporting.pdf

https://www.frc.org.uk/news/september-2021/frc-lists-successful-signatories-to-the-uk-steward