UK: FRC’s streamlined Stewardship Code 2026 redefines long-term sustainable value

The Financial Reporting Council (FRC) 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 in relation to investments in a wide range of asset classes, including listed equities and private capital. At the same time, the new streamlined Code 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 the FRC’s view 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, social or governance benefits.

Application of the Code

The Code is relevant to a wide range of organisations with different rights, responsibilities and influence within the investment chain. Asset owners (such as pension funds and insurers), asset managers and service providers (such as investment consultants and proxy advisors) can, on a voluntary basis, choose to apply and explain against the Code’s Principles how they deliver good stewardship outcomes. The FRC assesses the quality of those disclosures before allowing applicants to become publicly-acknowledged signatories to the Code.

As the effects of stewardship activities are felt by businesses, the Code’s revised recommendations are also relevant to a range of companies, including listed issuers and some privately-owned companies. 

Purpose of the Code

The Code aims to promote long-term value for UK investors, including savers and pensioners through the effective management of investments on their behalf. 

Importantly, the FRC has stressed that there is no single approach to exercising effective stewardship. The Code allows for transparency around the different approaches and activities of investors and service providers but does not dictate how signatories should comply with their fiduciary duties or set long-term goals.

The definition of stewardship

In line with this statement of the Code’s purpose, the FRC has updated the Code’s introductory wording 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”.

As proposed in the FRC’s consultation on the Code changes, this new definition no longer refers to stewardship “leading to sustainable benefits for the economy, the environment and society”. 

The FRC maintains that the 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. While some signatories may incorporate such wider benefits into their investment objectives, it is for each signatory to determine their own aims.

Instead, new wording, redrafted to refer back to 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 companies and escalation of issues

As promised at consultation stage, 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.

Reporting processes

The changes will be welcomed by signatories to the Code, especially investors, as they significantly streamline existing disclosure expectations, as well as focussing 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 more detailed guidance also set out non-prescriptive advice for signatories to the Code to help them to produce meaningful reporting.

Background and current policy approach

The 2026 version of the Code will replace the Stewardship Code 2020. When the previous 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 in favour of a more business-friendly policy were published last summer in advance of Stewardship Code changes being consulted on at the end of last year.

Timing

The updated Stewardship Code was published on 3 June 2025 and will take effect on 1 January 2026.  

Draft new guidance has also been made available and can be commented on up to 31 August 2025. The guidance will be finalised this autumn.

Current signatories to the 2020 Code should plan to 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. 

The FRC has also published 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.