FRC launches new UK Stewardship Code 2026

The Financial Reporting Council (FRC) describes the updates to the Code as “evolutionary and not revolutionary”. The focus is on a move away from ‘tick-box’ reporting towards a more individualised approach to stewardship and long-term sustainable value creation.

On 3 June 2025, the FRC published a revised UK Stewardship Code 2026 (replacing the UK Stewardship Code 2020), and accompanying draft guidance (which it intends to finalise in the Autumn). For further details, please see the FRC’s press release here and its 'UK Stewardship Code 2026 – at a glance' publication here. 

The revised code, effective from 1 January 2026 (with 2026 treated as a transition year for existing signatories) is the result of an extensive consultation launched in November 2024. It aims to refine the regulatory framework to promote long-term sustainable value creation for clients and beneficiaries while reducing reporting burdens for its nearly 300 signatories, who collectively have approximately £50 trillion in assets under management (AUM). The accompanying draft guidance is non-prescriptive, and whilst it is not the subject of a formal consultation process, the FRC has said that it welcomes suggestions for the guidance from stakeholders over the Summer.

“The new Code sets out clear expectations for effective stewardship, helping firms act with clarity. This is vital not only for building trust in UK markets but also for supporting long-term growth and competitiveness of the UK economy.”

Sacha Sadan, FCA Director of Sustainable Finance

These developments follow from the FRC’s publication of several immediate revisions to the 2020 Code in July 2024 (for further detail on these revisions, please our previous blog post here). 

Enhanced definition of stewardship 

The Code sets out stewardship standards for asset owners (such as institutional investors and pension schemes) and asset managers who manage assets on behalf of UK clients or invest in UK assets, as well as for service providers (such as proxy advisors, investment consultants and data and research providers). Whilst the Code is voluntary, it sets a high standard of transparency for signatories in the form of ‘apply and explain’ Principles indicating practices reflecting effective stewardship. 

The new Code introduces an amended definition of stewardship: 

“Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries ”

This definition responds to stakeholder concerns that the definition in the 2020 Code - “Stewardship is the responsible… oversight of capital… to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society” - suggested that ESG factors were standalone objectives that signatories must demonstrate they have delivered. The supporting language accompanying the new definition incorporates the wording that investors should “[have] regard to the economy, the environment and society, upon which beneficiaries’ interests depend”, which more closely aligns to the language used in section 172 of the Companies Act and may therefore better express how investors consider their responsibilities.

Despite concerns raised in the November 2024 consultation around the term “sustainable value creation”, the FRC maintains that the inclusion of “sustainable” in relation to value creation is not in conflict with the requirements of the FCA’s Sustainability Disclosure Requirements (SDR) regime. The new wording is intended to support growth and investment without losing focus on the importance of sustainability.

Reducing the reporting burden and introducing a more flexible reporting structure 

A key aim of the 2026 Code was to reduce the reporting burden, which the FRC says could reduce administrative burdens by an estimated 20-30%. The Code features fewer Principles, including by streamlining Principles 9, 10 and 11 of the 2020 Code (dealing with engagement, collaboration and escalation) into one engagement Principle (Principle 3). It also introduces shorter ‘how to report’ prompts in respect of each Principle instead of detailed reporting expectations, which respondents generally agreed would reduce generic ‘tick-box’ reporting. Escalation is being integrated as a feature of the ‘how to report’ prompts to reflect that this should be undertaken whenever necessary to achieve stewardship objectives rather than being an end in and of itself.  Broadly, the ‘how to report’ prompts are designed to encourage signatories to describe their individual approach to stewardship and are supported by separate reporting guidance. 

Under the new Code, signatory reporting to the FRC is in two parts. Signatories can either submit separate Policy and Context Disclosures (describing the organisation’s stewardship policies, governance structures and contextual information) and Activities and Outcomes Reports (describing how the organisation has applied the Principles over a 12-month period) or combine them into a single document. These provisions build on the FRC’s interim changes to the Code introduced in July 2024, which provided existing signatories with the ability to cross-refer to specific disclosures in the signatory’s most recent Stewardship Report and removed the requirement to update disclosures of ‘Context’ reporting expectations in the absence of material changes. 

In addition, the new Code notes that Policy and Context Disclosure will only need to be submitted once every four years (as opposed to annually). The FRC recognised, at the time of its interim changes in July 2024, that some information is relatively static, so reporting annual updates “does not necessarily add much”. 

Targeted Principles

The Code includes dedicated principles for different types of signatories, including asset owners, asset managers and service providers. For the first time, it will now include specific principles for proxy advisers, investment consultants and engagement service providers to reflect the importance of the services they deliver and ensure more insightful reporting on how they support stewardship through the investment chain.

Asset owners and managers

The FRC expects all these organisations to report on Principles 1 (integrating stewardship and investment), 2 (promoting well-functioning markets) and 6 (monitoring service providers). In response to feedback received in the November 2024 consultation, the FRC emphasises in the introduction of the Code and the accompanying guidance that organisations should individually consider the extent to which Principles 3 (engagement), 4 (exercising rights and responsibilities) and 5 (selection and oversight of managers) should be applied by organisations to reflect the activities they undertake. The FRC recognises that organisations vary by size and investment approach, and that it should therefore be up to the individual signatories to determine how to report on the Principles in a way that accurately conveys their stewardship approach and activities.

While the Code does not direct signatories on how to meet their fiduciary duties, as the FRC recognised in the November 2024 consultation, compliance with the Code can help investors demonstrate how their stewardship “supports them” to meet their fiduciary duties. For example, Principle 2, which applies to all organisations, provides signatories an opportunity to explain how they have identified, monitored and mitigated market-wide and systemic risks to improve outcomes for clients and beneficiaries.

Service providers

The Code sets out separate ‘targeted Principles’ for proxy advisors (Principle 2), investment consultants (Principle 3) and engagement service providers (Principle 4) for the first time. Principle 1, which requires signatories to communicate with clients to understand their objectives and deliver services to support their stewardship, applies to all service providers. In its Feedback Statement, the FRC recognised that some respondents called for more prescriptive requirements to be provided for proxy advisors’ operations, however the FRC found this was beyond the remit of its powers and the scope of the Code as it is not the regulator of proxy advisors. 

Looking ahead

To ease the shift to the new framework, the FRC has designated 2026 as a transition year (no existing signatories will be removed from the signatory list in 2026). The FRC has also committed to supporting signatories through webinars, publications, and individual engagement with signatories. 

As a next step, signatories should familiarise themselves with the new Code in order to prepare for the 2026 reporting cycle, with application windows to submit reports set for 30 April (for asset managers and service providers) and 31 May (for asset owners) for the spring 2026 window, and 31 October for the autumn 2026 window (for all applications). Whilst the amendments made to the Code should reduce some of the administrative burdens associated with reporting, thought must be given to how to apply a more individualised and targeted approach. The new optional guidance, which covers both the Policy and Context Disclosure and the Principles of the Activity and Outcomes Report, may provide helpful examples to support the implementation of the new Code. 

The FRC hosted a webinar on the UK Stewardship Code 2026 on Wednesday 18 June. You can watch this webinar here.