2026 FRC Stewardship Code – A significant improvement

The UK Stewardship code, which sets out the core principles of effective stewardship and transparency for asset owners and asset managers, has just had a major overhaul. The revisions follow on from a consultation in early 2026, to which ShareSoc responded

The 2026 Code, which takes effect in January 2026, introduces three key changes:

First, the purpose of stewardship has been clarified. The new definition is simply:

“The responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.”  

Reference to delivering benefits for the wider economy, environment, and society has been removed from the core definition. This doesn’t mean Environmental, Social, and Governance (ESG) factors are ignored; rather, they are recontextualised as potential long-term risks and opportunities that can impact financial returns, aligning the Code with a director’s fiduciary duties under the Companies Act. The “ESG guff” is out; thinking about material risks is in. 

Second, to dismantle the reporting “cottage industry,” the single, burdensome annual report has been scrapped. It is replaced by a smarter, two-part structure: 

1. A Policy and Context Disclosure: This covers the firm’s stable, foundational approach to stewardship and only needs to be submitted once every four years. 
2. An Activities and Outcomes Report: This is an annual submission focused purely on what the fund manager has done over the past 12 months and what results they achieved. 

 Third, the structural reporting change, combined with a reduction in the number of principles from 12 to six, is designed to slash the volume of reporting and shift the focus from boilerplate policies to tangible actions. 

In my opinion… 

For any of us who invest in funds and investment trusts, the question of what our fund managers are doing with our investments is very important. We appoint them based on their strategy for selecting investments to beat the market.  

But what happens after they buy the shares? How do they look after our capital and monitor the behaviour and activities of investee companies? This is the world of “stewardship,” and the Code that governs it has just had this major, and welcome, overhaul. 

The previous 2020 Code was ambitious, but its very ambition contained the seeds of the challenges that necessitated this 2026 revision. Its demanding and prescriptive reporting requirements led to widespread concern that it was fostering resource-intensive compliance activity.  

Fund managers were spending vast amounts of time and money producing lengthy annual reports to prove they were good stewards, which risked becoming a box-ticking exercise rather than a reflection of meaningful action.

Furthermore, the 2020 FRC Code’s definition of stewardship was a source of significant confusion. It stated that the goal was to create “long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society“. This phrasing was interpreted by many as creating a conflict with a fund manager’s primary fiduciary duty: to act in the best financial interests of their clients. Companies reported being quizzed by investors on issues they felt were immaterial to their business, seemingly so the fund manager could tick a box for their annual report.   

Thankfully, the Financial Reporting Council (FRC) has listened to this feedback. 

These changes are a significant and positive step. The re-focus on creating value for beneficiaries provides a much-needed clarification of a fund manager’s core purpose. The previous Code’s ambiguity risked distracting managers and muddying the waters of their fiduciary duty. 

The move to streamline reporting is also a direct and sensible attempt to curb the compliance burden. This should free up fund managers’ resources to concentrate on genuine engagement and investment analysis, rather than on producing glossy reports.  

In most fund management operations, the fund managers are separate from the governance professionals. Fund managers spend the vast majority of their time on stock research — analysing reports, trading updates, and market trends. They probably spend less than 10% of their time on governance itself. This reform helps ensure their focus remains on research, not compliance. 

That said, good stewardship is not just a cost. It can be a source of value. We should approve of the idea that investors can unlock value by identifying weak governance and working to improve it, even if it takes time. More importantly, engagement is a powerful tool for due diligence. If engagement reveals a highly competent and forward-thinking management team that is receptive to feedback, it can significantly increase a fund manager’s conviction in their investment. 

In this, fund managers should welcome support from individual investors. When institutional and individual investors join together on an issue, it lowers the cost for the fund manager, amplifies their influence, and can attract media attention to help achieve the engagement’s goals. 

However, a note of caution is warranted. While the volume of reporting will fall, the scrutiny on the new annual “Activities and Outcomes” report is likely to intensify. The risk is that the parasitic body of consultants and advisors simply pivots from helping firms write long stewardship reports to helping them craft perfectly polished narratives of success. The pressure to demonstrate positive outcomes every year may still lead to a focus on easy wins rather than tackling the tough, long-term issues that truly drive value. 

For individual investors, the new Code is empowering. It should give us a clearer, more concise picture of how our fund managers are actively working on our behalf. It moves the conversation away from “what is your policy?” to the far more important question: “What have you done, and what was the result?” This transparency is a powerful tool, enabling us to better hold our fund managers to account for the stewardship of our capital.

You can read the new FRC code here: https://www.frc.org.uk/library/standards-codes-policy/stewardship/uk-stewardship-code/ 

 ShareSoc responses to previous consultations on stewardship are below: 

 ShareSoc response to FRC consultation on Stewardship Code (Feb 2025): FRC Consults on UK Stewardship Code – ShareSoc Responds – ShareSoc

https://www.sharesoc.org/sharesoc-news/frc-new-uk-stewardship-code-and-fca-response-to-dp19-1-consultation/ (2019) 

Cliff Weight, Member of ShareSoc Policy Committee 

This article reflects the opinions of its author and not necessarily those of ShareSoc.