The Financial Reporting Council (FRC) has reclassified signatories to its Stewardship Code into three tiers according to the quality of their code statements.

Nearly 300 asset managers have signed up to the comply-or-explain code, representing 90% of the AuM of members of the Investment Association. 

Rather than being treated equally as plain signatories, the ones with the highest quality and most transparent code statements are recognised as tier one, with the remaining two tiers containing those with increasingly opaque arrangements. 120 asset managers have been categoried as tier one.

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.”

Asset managers that have not achieved at least tier two 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.

“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”.

Noel O’Halloran, chief investment officer at tier one-categorised KBI Global Investors, said: “We believe that exercising stewardship on behalf of investors is a key responsibility for investment managers. 

"It is not an add-on, and still less an afterthought, and we very much welcome the FRC’s efforts to ensure investors can more easily assess how their investment manager exercises that responsibility."

The FRC reports that more than 200 signatories have approached it to discuss improving their reporting against the code.

The voluntary UK Stewardship Code is complementary to the UK Corporate Governance Code for listed companies, which is also set by the FRC.