The UK’s corporate governance and regulatory landscapes are changing fast, driven by the government’s pro-growth agenda. The policy paper New approach to ensure regulators and regulation support growth, issued in March 2025, sets out an ambitious reform programme, focusing on making regulations proportionate, consistent and predictable.
Against this background, the Financial Reporting Council (FRC) published The UK Stewardship Code 2026 in June this year, following extensive consultation with stakeholders across the investment community. It represents a significant overhaul, providing signatories – asset owners, asset managers and service providers – with a more flexible, principles-based framework and an enhanced reporting process.
High standards
The aim of the code – which takes effect from 1 January 2026 – is to uphold high standards of stewardship while reducing administrative burdens. According to Richard Moriarty, the FRC’s CEO, it ‘focuses on long-term sustainable value creation while cutting unnecessary reporting and improving engagement quality’.
‘Stewardship’ here refers to the responsible allocation, management and oversight of capital by the investment community.
The code aims to improve the practice of stewardship, thereby enabling investors to hold companies and their boards more effectively to account. It promotes active investor engagement on issues such as corporate governance and strategy, rather than passive shareholding. It emphasises long-term value creation rather than a transactional focus on short-term financial gain.
Compliance has become overly bureaucratic and burdensome for signatories
Key features
There are five principal areas of change in the 2026 code:
- Enhanced definition of stewardship. The new wording is ‘Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.’ Explicit references to ‘the economy, the environment and society’ have been removed, though they are still acknowledged in the supporting commentary where relevant.
- Reduced reporting. The FRC has significantly reduced the number of principles in the new code; asset owners and asset managers now have six, and service providers have four (down from 12 and six respectively). Also, reporting prompts are now ‘how-to-report’ guidelines, rather than detailed expectations, with the aim of avoiding box-ticking.
- Flexible reporting structure. See below.
- Targeted principles. The code now includes dedicated principles for different types of signatories, including asset owners, asset managers and, for the first time, proxy advisers, investment consultants and engagement service providers. This enhances transparency and clarity in their roles within the investment chain.
- New guidance. The FRC will provide supplementary guidance to assist signatories in reporting (eg non-prescriptive tips and examples). This is currently in draft form following consultation, with final guidance expected in the autumn.
Together, these changes will facilitate signatories producing reports that, while still high quality, are shorter, more flexible and more relevant to their organisations, business models and strategies.
Reporting
The code is voluntary and comprises a set of ‘apply-and-explain’ principles. Being a code signatory demonstrates an investor’s commitment to stewardship, and provides transparent reporting on the stewardship they undertake on behalf of their clients and beneficiaries. The FRC will review the quality of signatories’ reports.
‘The revised definition could be interpreted as a scaling back of intent on sustainability’
To become a signatory to the new code, applicants will be required to structure their reports to the FRC into two parts, which they can submit separately or combine into one document:
- policy and context disclosure – submitted in the original application and every fourth year thereafter
- activities and outcomes report – submitted annually, requiring signatories to demonstrate how they have applied the code principles and the outcomes of their stewardship activities.
To help signatories adapt, the FRC is treating 2026 as a transition year; all existing signatories will remain on the approved list for the year. Applicants to the new code need to submit their reports within two specified windows: spring and autumn 2026. All applications are due by 31 October 2026.
Positive response
High-quality stewardship supporting economic growth and investment is the FRC’s overarching aim here. The response to the new code is positive, with support expressed for the streamlined approach, reduced reporting burden and focus on long-term value creation.
One contentious aspect, however, is the revised definition – a concern shared by ACCA in its consultation response – which noted: ‘We challenge whether the revised definition of “stewardship” could be interpreted as a scaling back of intent on sustainability.’
Ultimately, the FRC is confident that the code will result in improved reporting, noting ‘Early evidence suggests signatories may be able to reduce reporting volume by 20%-30% while maintaining quality.’
Moriarty confirms that the extensive consultation process drew ‘strong investor backing for the code’s importance’; its almost 300 signatories represent some £50 trillion assets under management.
The new code builds on this success. Rather than losing relevance, this update and overhaul is designed to ensure that the code remains fit for the future.
The background
The UK Stewardship Code was first published in 2010 in the aftermath of the global financial crisis, following recommendations in the Walker Report. It was revised and strengthened in 2012. Although originally world leading, the 2012 code began to attract criticism for being too narrow, focused entirely on the relationship between asset managers and companies, and was increasingly seen as out of date.
In 2020 the FRC updated and substantially revised the code. It introduced a new, strengthened stewardship agenda that set higher expectations for investors, their advisers and how they managed investments for their savers and pensioners.
However, the practical application of this code has given rise to new concerns that compliance has become overly bureaucratic and burdensome for signatories, resulting in long reports that are rarely read. To avoid charges of presiding over a tick-box regime, the FRC launched its 2024 consultation and extended review to ensure that stewardship activities remain meaningful and relevant.
