A new code draws the spotlight on how big investors engage with companies
Thursday 31 Oct 2019 Author: Tom Sieber

The introduction of a new UK Stewardship Code by the Financial Reporting Council will look to raise the bar on how big investors hold the companies in which they invest to account.

A lot of the headlines around the news focused on the climate change angle but there is more to the code than environmental concerns, including how institutions make their decisions and what they are doing about issues such as governance and diversity.

Fundamentally this is about recognising that investors are part-owners of a business. Even big asset managers are sometimes guilty of buying shares and seeing their work as done.

RIGHTS AND RESPONSIBILITIES

Taking true ownership involves both rights and responsibilities. It is easier for big institutional investors to engage with the firms they invest in than it is for individual shareholders, however that doesn’t mean you shouldn’t try too.

Go to AGMs if you can and if you are invested in smaller companies you may even find management will respond if you get in touch directly on an issue which exercises you.

The code is voluntary and lots of investors in UK firms are from overseas and may feel under less pressure to abide by it, but hopefully the industry sees this as an opportunity to be grasped. Most responses have been very positive so far, which is a promising start.

Anything that makes the investing more relevant in the eyes of the wider public has to be a good thing, particularly if it opens people’s eyes to the opportunities provided by putting their cash to work in the markets.

DON’T LOSE SIGHT OF UK STRENGTHS

In fairness, if it wanted to distract from its own shortcomings, the investment world could easily point to failures of stewardship among the political class in the UK.

As we write the country remains mired in a Brexit stalemate with the potential joys of a Christmas election. Companies and markets are still denied the clarity on the UK’s future relationship with the EU that they crave.

Amid the uncertainty it would be easy to lose sight of some of the attributes the UK enjoys. But there are plenty of them.

Alongside the release of Credit Suisse’s Global Wealth Report the investment bank’s UK chief Christian Berchem observed: ‘Equity markets have risen and we continue to see UK-based entrepreneurs thriving, businesses spotting new opportunities, and international mobile wealth continuing to be attracted by a transparent legal system, outstanding schools and universities and an unrivalled cultural proposition.’

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