2020 UK Stewardship Code

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March 21, 2024

Principles of the UK Stewardship Code

The 2020 version of the UK Stewardship Code includes principles such as:

  1. Purpose and Governance: Institutional investors should disclose their purpose, investment beliefs, strategy, and governance mechanisms.
  2. Investment Approach: They should manage conflicts of interest to put the best interests of clients and beneficiaries first.
  3. Engagement and Voting: Investors should engage with companies to maintain or enhance the value of assets and should exercise their rights and responsibilities.
  4. Integration of Stewardship and Investment: The integration of stewardship responsibilities into investment decisions.
  5. Collaboration with Others: Investors should, where necessary, work with other stakeholders to improve the governance and management of investee entities.
  6. Reporting on Stewardship Activity: Regular and transparent reporting on stewardship activities and outcomes is essential to accountability.

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UK Stewardship Code

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Green Washing

Greenwashing is the practice of making false or misleading claims about the environmental benefits or sustainability of a product, service, or company. This can include exaggerating or fabricating a product's eco-friendliness, hiding its negative environmental impacts, or making unsubstantiated claims about its sustainability.
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Measuring Double Materiality: Focus on Water Impact

Hypothetical beverage company called "FreshDrink Co." Financial materiality (impact on the company): Climate change is causing water scarcity in regions where FreshDrink Co. sources its water. This scarcity could lead to increased water costs and potential supply disruptions, directly affecting the company's financial performance and long-term viability. Environmental and social materiality (impact of the company): FreshDrink Co.'s water usage in water-stressed areas may deplete local water resources, affecting the surrounding ecosystems and communities' access to clean water.
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Measuring Double Materiality: Focus on Social Impact

Social impact in the context of double materiality refers to how a company’s operations affect people and communities. This includes direct and indirect consequences of business activities on employees, consumers, local communities, and society at large.
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Measuring Double Materiality: Focus on Governance Impact

Governance impact in the context of double materiality focuses on how a company’s governance structures influence both its financial performance and its broader societal impact. This approach requires organizations to evaluate both how governance practices affect their bottom line and how they impact stakeholders such as employees, shareholders, and the community.
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Double Materiality

Double materiality suggests that companies should assess the impact of external environmental and social factors on their operations (external materiality) and evaluate the impact of their activities on the external environment and society (internal materiality).
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Benchmarking

Benchmarking ESG peers enhances a company's sustainability efforts by identifying best practices, improving performance, ensuring regulatory compliance, and increasing transparency.