On 3 June 2025, the Financial Reporting Council ("FRC") published the UK Stewardship Code 2026 (the "Code"). The Code is a voluntary framework designed to promote high standards of stewardship among financial market participants, encouraging the responsible allocation, management and oversight of capital. This edition of the Code will replace the UK Stewardship Code 2020 (the "2020 Code") as of 1 January 2026. The Code outlines a number of Principles and Disclosures for effective stewardship and how they should be reported by Signatories. By revamping reporting under the Code, the FRC will be hoping to shift the focus away from administrative burden and tick-box disclosures, back to the core principles of effective stewardship.
This briefing provides an overview of the changes introduced by the Code, which include an amended definition of stewardship, a new reporting structure and specific Principles for asset owners/asset managers and service providers.
1. DEFINITION OF STEWARDSHIP
The FRC has updated the introductory wording of the 2026 Code to define stewardship as "the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries." This is a departure from the definition in the 2020 Code, which included the phrase "... leading to sustainable benefits for the economy, the environment and society".
The Code does retain a limited reference to the environment and society in the definition's supporting statement as follows: "[e]ffective stewardship supports investors to make well-informed investment decisions to deliver returns that meet the objectives of their clients and beneficiaries today, without compromising the ability to do so in the future. In doing so, investors take account of long-term risks and opportunities, having regard to the economy, the environment and society, upon which beneficiaries' interests depend" (our emphasis). The phrase "having regard to" the environment and society is inspired by s. 172 of the UK Companies Act and represents a compromise between the positions of asset owners, asset managers, industry associations, NGOs and the FRC. It nonetheless is a marked change in tone from the 2020 Code; for example, Principle 7 of the 2020 Code expressly required signatories to "systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities". Chief Executive of the FRC, Richard Moriarty, said that the previous definition of stewardship was open to being misinterpreted as the FRC dictating to signatories where and how to invest.
While the new definition of stewardship omits specific references to the environment and society, these elements are noted to be addressed in the supporting guidance and reporting framework.
2. PRINCIPLES
The FRC has reduced the number of Principles from twelve in the 2020 Code to six in the Code. This has partially been achieved by splitting the previous twelve Principles into six Principles and five Disclosures covering broadly comparable topics and themes. In theory, by not explicitly linking these Disclosures to the Principles, Signatories should be more able to transparently and accurately report their governance, activities, policies and procedures, rather than reporting only aspects which demonstrate compliance with the Principle in question.
As an example, Principle 6 in the 2020 Code requires asset owners and asset managers to "take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them". Reporting expectations include how they have sought beneficiaries' views and what they have communicated to beneficiaries about their stewardship and investment activities and outcomes to meet beneficiary needs.
By contrast, Disclosure E under the updated Code requires the organisation to "Describe how you maintain a dialogue with clients and/or beneficiaries". The two sub-Disclosure requirements relate to methods used to share information and how feedback is used to inform the stewardship approach.
3. REPORTING STRUCTURE
Under the 2020 Code, reporting was conducted in accordance with twelve Principles. Reporting under these Principles ranged from more organisation-specific disclosures about the Signatory, its governance and stewardship policies, to more activity-specific disclosures regarding how Signatories engage with issuers to maintain or enhance the value of assets. Reporting obligations under each Principle were divided into three sub-headings, namely 'Context', 'Activity' and 'Outcome'.
The updated Code streamlines the existing reporting structure, with an estimated 20-30% reduction in reporting burden. This is likely to be welcomed by industry, who noted that the reporting expectations laid down in the 2020 Code were often widely drafted and open to interpretation, necessitating over-reporting.
The Code splits the reporting obligations into two individual elements as follows:
- The Policy and Context Disclosure serves as a
foundational document outlining key contextual information about
the organisation, its governance framework and stewardship
policies. The Disclosures for asset owners/managers under the
Policy and Context Disclosure broadly reflect Principles 1, 2, 3, 5
and 6 of the 2020 Code.
Asset owners/managers and service providers must report under separate Disclosures. As the information is considered to stay relatively stable over time, Signatories are expected to submit a Policy and Context Disclosure once every four years (subject to major changes with the organisation).
- The Activities and Outcomes Report focuses
specifically on stewardship activities conducted during a given
year and their outcomes. Signatories should clearly demonstrate the
practical application of stewardship policies and explain how these
activities supported the delivery of long-term sustainable value
for clients and beneficiaries.
The Activities and Outcomes Report comprises a set of 'apply and explain' Principles for asset managers and asset owners, and a separate set of Principles for service providers. The Principles for asset owners/managers under the Activities and Outcomes Report broadly reflect Principles 4, 7, 8, 9, 10, 11 and 12 of the 2020 Code. Unlike the Policy and Context Disclosure, it should be submitted annually.
In years when both reports are required to be published, Signatories can choose to submit the Policy and Context Disclosure and the Activities and Outcomes Report as separate documents or combine them into one comprehensive submission. Both reports must be reviewed and approved by the Signatory's governing body and signed by the Chair, Chief Executive or Chief Investment Officer.
4. TIMING
The Code will take effect on 1 January 2026. Current Signatories should plan to report as usual by 31 August 2025 against the 2020 Code to maintain their status.
First reports against the revised Code can be submitted to the FRC from 2026. The FRC will treat 2026 as a transition year and all existing Signatories submitting a renewal application will remain on the Signatory list during this period.
Draft new guidance on the Code has been published and will be open for comment until 31 August 2025. The FRC intends to finalise this draft guidance in autumn 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
