FRC issues new streamlined Stewardship Code 2026

The Financial Reporting Council has finalised revisions to its UK Stewardship Code. The Stewardship Code 2026 will begin to take effect next year and aims to maintain high standards for a broad range of investments, including listed equities and private capital. At the same time, a streamlining of the existing version seeks to encourage competitiveness and growth by reducing reporting obligations for the investors, asset managers, and related service providers that choose to follow it. 

One of the key changes in the Code is an updated definition of what stewardship is for. This now emphasises that it is for shareholders to decide what long-term sustainable value means for their own investments. This may, but does not need to, include the pursuit of environmental, governance or social benefits.

The 2026 Code also includes, for the first time, targeted Principles to encourage greater transparency about the activities of service providers, including proxy advisors.

Purpose and relevance of the Stewardship Code

The Code aims to promote long-term sustainable value for investors, including UK savers and pensioners, by establishing the core Principles of effective stewardship, and setting a high standard of transparency about investor policies and practices. 

Accordingly, the first part of the Code sets out disclosure expectations and best practice Principles for asset owners, such as pension funds and insurers, and asset managers. As before, a second section is directed at those providing related services, namely proxy advisors, investment consultants and engagement service providers. 

Investors and their service providers can choose to apply and explain against the Code’s Principles on a voluntary basis. If the FRC is satisfied with the quality of the disclosures submitted in the required formats, it will accept an organisation as a publicly-acknowledged signatory to the Code. Although the Code itself is not mandatory, adhering to it will also help pension schemes, insurers, asset managers and proxy advisors meet other stewardship-related UK regulatory requirements and expectations that apply to them.

The Code's revised recommendations, and its impact on investors and their advisors, will be of interest as well to investee businesses, including issuers of listed shares, and some privately-owned companies.

The definition of  stewardship

The FRC has stressed that there is no single approach to exercising effective stewardship. As proposed in its consultation on the Code changes, the definition has been updated to state that: “Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.” 

Sustainable value means decisions to deliver returns that meet the objectives of investment clients and beneficiaries today, “without compromising the ability to do so in the future”.

Previous wording which referred to stewardship “leading to sustainable benefits for the economy, the environment and society” has been removed. The FRC maintains that this change is necessary so that it is clear that ESG-related benefits are not standalone objectives for all signatories to demonstrate that they have delivered. 

Instead, new wording, redrafted to echo the statement of directors’ duties in Section 172 of the Companies Act 2006, now goes on to say that investors, as part of making well-informed investment decisions, “take account of long-term risks and opportunities, having regard to the economy, the environment and society, upon which their beneficiaries’ interests depend”. 

Engagement with investee companies and escalation of issues

As proposed in its consultation on the Code, the FRC has clarified that, whilst collaboration amongst investors and the escalation of issues with companies remain important stewardship tools, these will not fall to be deployed every year, and escalation should not become an end in itself.

This clarification should be helpful for both institutional investors and their investee companies.

Proxy advisors

Many listed companies continue to have concerns about how proxy advisors analyse and represent their governance and general meeting proposals when producing investor reports and voting recommendations. Some respondents to the FRC’s consultation on the Code called for more prescriptive requirements to be imposed on proxy advisors. 

The FRC has reiterated that it has no power to regulate proxy advisors. The new Code does aim, however, to focus more attention onto their activities and this may prove helpful for investee companies in the future. A dedicated Principle of the Code now requires proxy advisors who sign up to it to explain how they ensure the quality and accuracy of their research, recommendations and voting implementation. Explanations should include how proxy advisors have engaged with their investor clients and other stakeholders, and how they have developed their standardised voting policies. 

Code guidance also suggests that proxy advisors should give examples of how they have engaged with stakeholders to improve the accuracy of their research (including by giving companies the opportunity to review and discuss their recommendations), and/or how they have dealt with requests to amend their findings. 

On the other side of the equation, and adding to the focus on good advisory behaviour, asset owners and managers are now more explicitly encouraged to explain how they monitor quality and accuracy, and how they hold the proxy advisors they use to account. This could include giving information about engagement with advisers following any inaccuracies, and how they were resolved.

Reporting processes

The Code’s more flexible and streamlined disclosure obligations will be welcomed by investor signatories. They seek to focus attention on annual reports on stewardship activities and outcomes. Contextual information, such as about stewardship policies and governance structures, must still be provided, but only needs to be renewed every four years. 

New prompts and longer guidance also set out non-prescriptive advice to help Code signatories produce meaningful reporting.

Background  and current policy approach

The 2026 version of the Code will replace the Stewardship Code 2020. When the 2020 version was introduced, the FCA and the FRC were working together on a number of proposals to enhance stewardship activities and investor oversight of companies. The current revisions, however, seek to encourage UK competitiveness and growth by rolling back overly burdensome obligations.

Interim changes to ease reporting requirements were published last summer in advance of a consultation on the Stewardship Code's changes being launched at the end of last year. For a reminder of the FRC’s consultation proposals, see our article here.

Timing

The updated Stewardship Code was published on 3 June 2025 and will take effect on 1 January 2026.  New guidance on the Code has also been made available in draft form. The FRC will accept comments on this guidance up to 31 August 2025, with a view to finalising it this autumn.

Current signatories to the 2020 Code can report as usual in 2025 to maintain their status as acknowledged signatories. First reports against the new Code can then be submitted to the FRC in 2026. The FRC will treat 2026 as a transition year for existing signatories.

More information

The Stewardship Code 2026 is available here, alongside the FRC's draft Code guidance, a Feedback Statement on its Stewardship Code consultation and an accompanying press release. 

To hear from the FRC directly on the new Code, you can register for a webinar to be held on 18 June.