Recent changes to the UK Stewardship Code: streamlining reporting and enhancing flexibility

Home
Knowledge
Recent changes to the UK Stewardship Code: streamlining reporting and enhancing flexibility

Recent changes to the UK Stewardship Code: streamlining reporting and enhancing flexibility

{2B6315F8-0C4C-42F4-8B79-B0AD9B3A6F18}

June 13, 2025

1. Background

The UK Stewardship Code (the Code) was first established in 2010 by the Financial Reporting Council (FRC) with the aim of enhancing the quality of engagement between institutional investors and companies. At its core, the Code aims to promote the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries. The Code serves as a voluntary framework that sets high stewardship standards for asset owners (such as pension schemes, insurers, local government pension pools and sovereign wealth funds), asset managers (who manage assets on behalf of UK clients or invest in UK assets) and service providers who support them, encouraging them to create sustainable value for UK savers and pensioners. As a cornerstone of the UK's investment ecosystem, the Code is widely regarded as crucial to maintaining the UK's reputation as a world-leading financial centre. It currently has nearly 300 signatories who represent around £50 trillion in assets under management.

The FRC committed to reviewing the Code after a few years of the 2020 Code in operation. In November 2024, the FRC undertook an extensive consultation on revisions to the Code. Following the consultation, on 3 June 2025 the FRC published the UK Stewardship Code 2026¹ (the 2026 Code), which will be effective from 1 January 2026. The FRC will also introduce guidance to assist applicants with reporting on the 2026 Code.²

2. Key changes in the 2026 Code

The 2026 Code represents a significant evolution from the previous 2020 Code and aims to support long-term value creation while significantly reducing the reporting burden for signatories.

2.1 Principles of the 2026 Code

The 2026 Code establishes distinct sets of principles for different types of signatories, including specific principles for proxy advisors, investment consultants and engagement service providers:

Principles for Asset Owners and Asset Managers

Integration of Stewardship and Investment: "Signatories integrate stewardship and investment to deliver long-term sustainable value for their clients and beneficiaries."

Market-wide and Systemic Risks: "Signatories identify and respond to market-wide and systemic risks to promote a well-functioning financial system."
Engagement: "Signatories engage to maintain or enhance the value of assets."

Principles for Service Providers

Client Communication: "Signatories communicate with clients to understand their objectives and deliver services to support their stewardship."
Proxy Advisors: "Proxy advisors ensure the quality and accuracy of their research, recommendations and voting implementation."
Investment Consultants: "Investment consultants identify and respond to market-wide and systemic risks to promote a well-functioning financial system."
Engagement Service Providers: "Engagement Service Providers engage on behalf of their clients to maintain or enhance the value of assets."

3. Key changes from the 2020 Code to the 2026 Code

3.1. Revised definition of stewardship

What's changed: The definition of stewardship has been significantly revised to focus on the principle of stewardship as the creation of long-term sustainable value for clients and beneficiaries.

2020 definition: "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."
2026 definition: "The responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries."

This change addresses concerns that the previous definition implied a duty to deliver societal or environmental benefits beyond economic aspects.

3.2 Reduced number of principles

What's changed: The number of principles has been significantly reduced.

2020 Code: 12 principles for asset owners and asset managers, and six principles for service providers.
2026 Code: Six principles for asset owners and asset managers, and four principles for service providers.

3.3 Flexible reporting structure

What's changed: The reporting structure has been streamlined.

2020 Code: Required annual reporting against all principles with Context, Activity and Outcome sections.
2026 Code: Introduces a flexible reporting structure:
- Policy and Context Disclosure (to be submitted to the FRC every four years); and
- Activities and Outcomes Report (to be submitted to the FRC annually).
  
  Applicants may choose to submit Policy and Context Disclosure more frequently, but it is not required. Applicants may also choose to present the Policy and Context Disclosure and the Activities and Outcomes Report either as separate documents or combined in a single comprehensive submission as they prefer. They may also choose to report principle-by-principle or take a more narrative approach.
  
  Both Reports must be reviewed and approved by the applicant's governing body, and signed by the chair, chief executive or chief investment officer.

3.4 Removal of ESG-specific principles

What's changed: The explicit ESG principles have been removed.

2020 Code: Included specific principles (Principle 7 for asset owners/managers and Principle 5 for service providers) focused on ESG issues.
2026 Code: ESG considerations are integrated throughout the principles rather than having dedicated principles.

3.5 Removal of escalation of issues as a standalone principle

What's changed: Escalation of issues is no longer a separate principle.

2020 Code: Included a specific principle on escalation of issues.
2026 Code: Escalation of issues is integrated throughout the principles.

3.6 Streamlined reporting requirements

What's changed: The reporting requirements have been significantly streamlined.

2020 Code: Detailed reporting expectations for each principle.
2026 Code: Shorter "how to report" prompts instead of detailed reporting expectations, with an anticipated 20-30% reduction in reporting volume.

3.7 Optional guidance

What's changed: The 2026 Code introduces optional guidance to support implementation.

2020 Code: More prescriptive approach to reporting.
2026 Code: New optional guidance to provide tips and examples to support effective implementation.

4. Application windows and transition period

The Code will have two application windows for submissions:

Spring 2026:
- Asset managers and service providers: due by 30 April 2026.
- Asset owners: due by 31 May 2026.
Autumn 2026: All applications due by 31 October 2026.

To ensure a smooth implementation, 2026 will be treated as a transition year, with no existing signatories being removed from the signatory list following their 2026 application. This will allow current signatories to familiarise themselves with the new format and use it as a platform to explain their individual approach to stewardship. The FRC will engage with signatories through publications, webinars and bilateral discussions to support the transition.³

5. Conclusion

The changes to the Code represent a significant evolution in the UK's approach to investment stewardship. By reducing reporting burdens, clarifying the definition of stewardship and providing a more flexible principles-based framework, the FRC aims to enhance the effectiveness of the Code in promoting responsible allocation, management and oversight of capital.

These changes reflect a move towards a more streamlined, flexible approach that accommodates different business models while still ensuring transparency and accountability in stewardship activities.