Definition Downgrade: FRC Reframes Stewardship in 2026 UK Code
June 3, 2025
The Financial Reporting Council (FRC) has unveiled the UK Stewardship Code 2026, which looks to bolster reporting to “showcase high quality stewardship” and “support economic growth and investment”.
However, the FRC’s removal of reference to “the environment and society” in its definition of stewardship has been met with criticism by stakeholders.
The new version of the code will come into effect from January 1, 2026, with the first applications to the updated code accepted in Spring 2026.
Key features of the new code include an updated definition of stewardship, efforts to reduce reporting burdens for code signatories, and adding targeted principles for different types of signatories, including specific principles for proxy advisors and investment consultants for the first time.
It also provides new guidance containing tips and examples to support effective implementation of the code.
The current edition of the code has been in place since 2020. It was the first update since the code was initially introduced in 2010. It currently counts almost 300 signatories representing approximately £50 trillion (U$67.6 trillion) in AUM.
“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,” said Richard Moriarty, CEO of the FRC.
“Extensive consultation confirmed strong investor backing for the code’s importance and has directly informed the changes we have made to ensure it remains fit for the future,” he added.
One of the most controversial changes in the UK Stewardship Code 2026 is a change to the definition of stewardship. In the 2020 code, the definition read: “Stewardship is 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”.
However, the new definition has been pared back to read: “Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries”.
In July, Minerva Analytics reported that more than 1,500 stakeholders had engaged on the updates to the code. This was followed by a public consultation which ran from November 11, 2024 to February 19, 2025. This consultation received 182 written responses, 35% of which were from asset managers, 21% asset owners, and 10% service providers.
Minerva Analytics responded to the FRC’s consultation and criticised its widely controversial revised definition of stewardship. Minerva also disagreed with the updated Service Providers’ Code having some principles that are applied only by proxy advisors, and others that are only applied by investment consultants.
Minerva has been a voluntary signatory of the UK Stewardship Code since its inception in 2010, reflecting the organisation’s long-standing commitment to responsible investment and good stewardship. Minerva remains aligned with the principles of the Code, and has been a Stewardship Code signatory since 2022. Our latest stewardship report can be found here.
A principal part of the updated code is what the FRC calls an “enhanced definition” of stewardship which “focuses on the principle of stewardship as the creation of long-term sustainable value for clients and beneficiaries”.
The FRC had previous consulted on a revised definition of stewardship which was met with alarm by asset owners, asset managers and other stakeholders.
The council had proposed an altered definition, which included the sentence: “stewardship that supports sustainable, long-term returns may lead to wider benefits for the economy, the environment and society”.
“The proposed redefinition of stewardship in the Code raises significant concerns which we believe do not align with our clients’ legal requirements and legitimate investment beliefs,” Minerva Analytics stated in its consultation response. “The insertion of the word ‘may’ in relation to stewardship’s impact on the economy, environment and society introduces ambiguity. The shift weakens the key principle that responsible stewardship inherently considers systematic risks and opportunities.”
The FRC somewhat addressed the criticism stakeholders, removing the controversial “may” from the sentence.
It now reads: “Effective 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.”
The 2026 UK Stewardship Code will also look to reduce reporting burden by featuring fewer principles and shorter ‘how to report’ prompts instead of detailed reporting expectations. According to the FRC, early evidence suggests that signatories could reduce reporting volume by 20-30% while “maintaining quality”.
The revised code includes dedicated principles for different types of signatories, including asset owners, asset managers. It has additionally introduced new specific principles for proxy advisors, investment consultants, and engagement service providers.
The principle impacting proxy advisors will require them to explain how they “ensure the quality and accuracy of their research, recommendations and voting implementation”.
This will also encompass proxy advisors explaining how they have developed their benchmark voting policy or standardised policies, including how they have engaged with clients and others to inform their development.
Proxy advisors will additionally have to detail which stakeholders they have engaged with and how, and in what circumstances the engagement has occurred, including where stakeholders have requested engagement.
“The separation of service providers into different segments is as unhelpful as it is curious,” said Sarah Wilson, CEO at Minerva Analytics. “Pigeonholing service providers this way just doesn’t reflect today’s reality. It certainly doesn’t encourage competition and diversity.
“There is an ongoing political trope that proxy advisors provide inaccurate research when, as the disclosures from the Best Practice Principles Group reporting shows, service quality is overwhelmingly taken extremely seriously and what differences there are come from different opinions,” she added. “It’s just not borne out by the facts and it’s disappointing to see the FRC seems to have succumbed to the ongoing lobbying.”
During the last few years, Minerva Analytics has been supporting asset managers and asset owners in preparing for their Stewardship Code submissions by offering a comprehensive Stewardship Code Gap Analysis.
This service maps disclosures provided by the client in its latest annual report FRC’s UK Stewardship Code principles. This provides a clear view on areas where the client has failed/potentially fails to comply with the requirements of the code as well as areas for potential improvements.
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Last Updated: 3 June 2025