The Financial Reporting Council (FRC) has unveiled the UK Stewardship Code 2026, a revised framework designed to enhance transparency and promote long-term sustainable value creation across the investment chain. While the updated Code promises to reduce reporting burdens by up to 30% and introduces tailored principles for different market participants, its fitness for asset owners has been questioned by industry experts and stakeholders alike.
Overview of the UK Stewardship Code 2026
The UK Stewardship Code, first introduced as a voluntary standard for investors, has become a global benchmark for stewardship best practices. The 2026 revision, published on June 3, 2025, follows an extensive consultation involving over 1,500 stakeholders and nearly 300 signatories managing approximately £50 trillion in assets under management (AUM).
The updated Code takes effect from January 1, 2026, and aims to:
- Support long-term sustainable value creation for clients and beneficiaries.
- Significantly reduce the reporting burden on signatories by streamlining principles and reporting expectations.
- Improve the quality of engagement between asset owners, managers, and investee companies.
- Introduce dedicated principles for asset owners, asset managers, proxy advisors, investment consultants, and engagement service providers.
The FRC emphasizes that the Code is principles-based and flexible, allowing signatories to tailor their stewardship approaches without prescriptive investment directives.
Key Features of the 2026 Stewardship Code
Enhanced Definition of Stewardship
The revised Code broadens the definition of stewardship to focus explicitly on the creation of long-term sustainable value for clients and beneficiaries. This shift aligns stewardship with broader economic and social outcomes, emphasizing sustainability as a core objective.
Reduced Reporting Burden
One of the Code’s central goals is to alleviate the extensive reporting demands that have previously been criticized for encouraging a tick-box mentality. The new framework reduces the number of principles and replaces detailed reporting expectations with shorter, more focused “how to report” prompts. Early evidence suggests signatories could reduce their reporting volume by 20-30% while maintaining quality.
Flexible Reporting Structure
The Code allows signatories to submit either combined or separate reports on their stewardship policies and activities. Notably, the policy and context disclosure only needs to be submitted once every four years, further easing administrative burdens.
Targeted Principles for Different Market Participants
For the first time, the Code includes specific principles tailored for proxy advisors, investment consultants, and engagement service providers, alongside those for asset owners and asset managers. This aims to enhance transparency and accountability throughout the investment chain.
Transition Year for Signatories
To facilitate adaptation, 2026 is designated a transition year during which no signatories will be removed from the list. This allows existing signatories time to familiarize themselves with the new Code and adjust their stewardship approaches accordingly.
Industry Reactions and Criticisms
Despite broad investor backing for the Code’s importance, several voices have raised concerns about its suitability for asset owners and practical implications.
Concerns Over the Revised Stewardship Definition
Minerva Analytics criticized the FRC’s reframing of stewardship, describing the revised definition as controversial and potentially problematic for asset owners. Some argue that the removal of explicit environmental, social, and governance (ESG) references from the stewardship definition dilutes the Code’s focus on sustainability.
Fit for Asset Owners Questioned
Adam Matthews, a prominent voice in UK asset management, bluntly stated that the Code is “no longer fit for asset owners,” arguing that it remains designed primarily for asset managers focused on alpha generation. Matthews highlighted that asset owners should emphasize strategic capital allocation and policy engagement rather than detailed low-level reporting, which he sees as a waste of resources.
Reporting Burden Paradox
While the FRC aims to reduce reporting burdens, some stakeholders worry the new Code could inadvertently increase data demands. The Investment Association and others have noted that clients may request more detailed information to comply with the Code’s expectations, potentially negating the intended relief.
Systemic Risks and Managerial Influence
There is concern that the Code’s expectation for signatories to address systemic risks—such as climate change and social inequality—may impose unrealistic duties on investment managers who have limited direct influence over such broad challenges.
Statements from Regulatory Leaders
Richard Moriarty, FRC CEO, emphasized the Code’s flexible, principles-based approach:
“The UK Stewardship Code 2026 provides signatories with a flexible principles-based framework that provides greater transparency on their stewardship in the face of unprecedented uncertainty. The updated Code focuses on long-term sustainable value creation while cutting unnecessary reporting and improving engagement quality. New dedicated principles for proxy advisers increase transparency in the investment chain. The Code is not prescriptive and does not direct how any signatory should chooseto invest.
Sacha Sadan, FCA Director of Sustainable Finance, praised the Code’s role in fostering transparency:
“The FRC’s new Stewardship Code represents a strong, industry-wide commitment to improving transparency in stewardship practices. It enables owners to access high-quality information about how their assets are being managed. The new Code sets out clear expectations for effective stewardship, helping firms act with clarity. This is vital not only for building trust in UK markets but also for supporting long-term growth and competitiveness of the UK economy.
The UK Stewardship Code 2026 marks a significant evolution in stewardship standards, aiming to balance the need for sustainable long-term value creation with practical reporting efficiencies. Its flexible, principles-based framework and reduced administrative demands represent a welcome shift for many signatories.
However, the Code’s fitness for asset owners remains under scrutiny. Critics argue that the revised stewardship definition, potential reporting paradoxes, and systemic risk expectations may not align well with asset owners’ strategic roles. As the transition year unfolds, the investment community will closely watch how asset owners and other signatories adapt to the new framework and whether the Code truly delivers on its promise to enhance stewardship quality while reducing burdens.
