They are among 39 asset managers who were given six months last November to get their act together after only making it into tier 3. This was the lowest of the categories in the system established by the FRC to classify how well the signatories are doing in reporting their stewardship policies.
The 39 were placed there because the FRC had decided they needed to make significant reporting improvements but they had failed to engage with the process of improving their statements.
The FRC warned them that they would have to achieve tier 2 status within six months or face being removed from the list of signatories because their reporting would not demonstrate commitment to the code’s objectives.
The other half of the tier 3 asset managers have now been reclassified as tier 1 (signatories provide a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary) or 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 form provisions of the code).
Tier 3 has now been removed.
The FRC reports that over the past 18 months the majority of signatories – which include asset owners and service providers as well as asset managers – have significantly improved their status.
Of the 96 asset managers on the list of signatories, 61 are classified tier 1 and 35 tier 2, while out of 85 asset owners, 61 are tier 1 and 24 tier 2. All 11 service providers have been classified in tier 1.
However, they will not be able to rest on their laurels. The FRC says that adopting a reporting approach which is transparent “allows clients to discuss with asset managers their different approaches to stewardship, therefore ensuring they best meet their needs”. So it will be looking for continuous improvement from the signatories.
The FRC has also announced it will consult about aspects of the Stewardship Code when it launches its formal consultation on the Corporate Governance Code later this year, including whether the tiers are set at the requisite level. There will then be a more detailed consultation in 2018 when it asks for views on proposals for changes to the Stewardship Code.