Under Rule 2.2.3.R of the FCA’s Conduct of Business Sourcebook SV Health Managers LLP (the “SV”) is required to include on this website a disclosure about the nature of its commitment to the UK Financial Reporting Council’s Stewardship Code (the “Code”) or, where it does not commit to the Code, its alternative strategy.
The Code was first published by the FRC in July 2010, and it was updated in September 2012. Subsequently, the FRC published the new UK Stewardship Code 2020 (“2020 Code”), which took effect on 1 January 2020, and consists of 12 Principles for asset managers and asset owners and six Principles for service providers.
The Code applies on a ‘comply or explain’ basis and is voluntary, aiming at enhancing the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and provide for the efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies that institutional investors should aspire to.
The FRC defines ‘stewardship’ as ‘the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.’
The 2020 Code Principles are:
1) Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship that creates long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
2) Signatories’ governance, resources and incentives support stewardship.
3) Signatories manage conflicts of interest to put the best interests of clients and beneficiaries first
4) Signatories identify and respond to market-wide and systemic risks to promote a well-functioning financial system.
5) Signatories review their policies, assure their processes and assess the effectiveness of their activities.
6) Signatories take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them.
7) Signatories systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.
8) Signatories monitor and hold to account managers and/or service providers.
9) Signatories engage with issuers to maintain or enhance the value of assets.
10) Signatories, where necessary, participate in collaborative engagement to influence issuers.
11) Signatories, where necessary, escalate stewardship activities to influence issuers.
12) Signatories actively exercise their rights and responsibilities.
The Code is voluntary and sets out a number of principles relaying to engagement by investors with UK equity issuers, fixed income, private equity, infrastructure investments, and in investments outside the UK.
SV pursues a number of investment strategies on assets and companies in the biotech sector.
The British Private Equity and Venture Capital Association’s (“BVCA”) published a response in March 2019 to the FRC’s proposed revision to the Code in the context of private equity (“PE”) and venture capital (“VC”) firms. The BVCA stated that in its view the Stewardship Code is less applicable to PE/VC firms and hence there would be limited benefits for such firms in adopting it. Furthermore, it would result in duplicate reporting requirements given the existence of other similar codes across the PE/VC industry.
SV supports the BVCA’s view and has therefore, chosen not to commit to the Code. It should be noted however, that the SV is a signatory of the Principles for Responsible Investment (“PRI”) which are fully embedded within its ESG Policy and underlying investment processes. Compliance with the PRI Principles forms a key basis for engagement with the SV’s investors, investee companies and other stakeholders.