FRC publishes new Stewardship Code 2026

Following an extensive period of consultation with various stakeholders, the Financial Reporting Council has finally published its new Stewardship Code 2026.[1] This will replace the Stewardship Code 2020 (the “2020 Code”). Draft optional guidance[2] to assist applicants with reporting against the UK Stewardship Code 2026 has also been published. 

We have published a detailed briefing, which sets out the background to the revisions to the Code, the key proposals consulted on and the position reached in the new Code, next steps and timings, and wider commentary on the main changes. 

Of particular interest to sustainability practitioners will be the revised definition of stewardship in the new Code. Stewardship is defined as “the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.” The definition in the 2020 Code was “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.” Similarly, some explicit references to ESG matters have been removed, for example in Principle 1, where the wording “sustainable value” is used instead. 

The new definition is the same as the definition proposed in the consultation, but the supporting language which provides commentary has been updated to reflect feedback received and to clarify that investors can (and do) take into consideration a wide range of factors as part of their primary objective to deliver long-term sustainable value to their clients and beneficiaries. Some have raised concerns that the previous definition of stewardship in the 2020 Code has led to a (mis-) interpretation of the definition as meaning that wider benefits to the economy, environment and society should be seen as standalone objectives that always need to be delivered. The revised supporting language echoes the language in section 172 of the Companies Act 2006 (on directors’ duties) in describing what is expected of investors by providing that they should “take account of long-term risks and opportunities, having regard to the economy, the environment and society, upon which beneficiaries’ interests depend”. It is for investors to weigh these factors appropriately when making investment decisions. 

The changes to the definition and related wording in some of the Principles is reflective of the direction of the new Code in not specifically prescribing the range of factors that may be taken into account by firms in their different approaches to stewardship. In any event it is probably the case that, for many organisations, consideration and systematic integration of ESG matters already forms part of routine decision-making processes, particularly in relation to long-term value creation (and as such may not need to be expressly called out). Indeed, whilst responses to the updated definition have been somewhat mixed, the investment industry has been broadly supportive to date. 

[1]The UK Stewardship Code 2026

[2]UK Stewardship Code 2026 Guidance