The UK Stewardship Code 2026: Progress or a Step Back?

The Financial Reporting Council (FRC) has unveiled the long-awaited update to the UK Stewardship Code, and it has already sparked a lively conversation across the investment industry. On one hand, the revisions are being welcomed for addressing long-standing criticisms, namely the heavy reporting burden and lack of clarity. On the other, some observers worry that the heart of stewardship - particularly environmental and social responsibility - has been diluted in the process.

So, is this a step forward or a quiet retreat from the UK’s leadership in sustainable finance?

What’s Changed?

The UK Stewardship Code 2026 introduces several reforms aimed at improving the effectiveness and accessibility of stewardship practices. These include:

• A new definition of stewardship, focused on “the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.”

• Simplified reporting requirements, with a 20–30% reduction in volume expected, as the number of principles has been reduced and prompts are more concise.

• Dedicated principles for service providers, including proxy advisers, to promote transparency and accountability across the investment chain.

• A greater emphasis on engagement outcomes rather than process-heavy disclosures.

These changes come after an extensive review and reflect feedback from investors, asset owners, consultants, and civil society groups. The FRC has made clear that the goal is to raise the quality of reporting while lowering the time and resource burden, especially for smaller firms.

A Shift in Tone

The most debated aspect of the new Code is the change in its definition of stewardship. The 2020 version referred explicitly to creating sustainable benefits “for the economy, the environment and society.” That framing, while broad, made clear the interdependence between financial returns and material environmental and social factors.

By contrast, the 2026 version focuses on creating sustainable value for clients and beneficiaries, without explicitly referencing environmental or social outcomes. While that may seem like a minor linguistic tweak, it represents a meaningful shift in tone - and potentially in substance.

There are concerns that this revised definition could signal a deprioritisation of ESG issues, just as scrutiny of environmental and social risks is intensifying globally. For many, this is not just semantics - it shapes how stewardship is interpreted and delivered on the ground.

The Asset Owner Perspective

Asset owners - particularly pension funds, endowments, and insurers - have been clear in recent years: stewardship must be credible, outcome-oriented, and fully aligned with long-term value creation. ESG risks are financial risks, and the duty to beneficiaries includes managing those risks with seriousness and transparency.

Many asset owners are watching closely to see how the new Code will be implemented. There is concern that without strong, explicit signals around ESG and systemic risk, stewardship practices could become more procedural than purposeful. As one investor quoted in Net Zero Investor put it, there are questions about whether the updated Code still merits the same level of commitment and resource.

However, while some language has changed, the expectations from asset owners have not. They continue to call for effective engagement, clear reporting, and escalation when needed. The message is simple: ESG integration is not optional, and stewardship remains a vital tool for managing long-term risk and opportunity.

A Missed Opportunity - or a Strategic Reset?

It’s clear that the FRC had good intentions. The 2020 version of the Code was ambitious but often felt like a significant weight on resources. Many stewardship reports became box-ticking exercises, filled with lengthy narratives but light on outcomes. The move to streamline reporting and focus on actual engagement results is a step in the right direction.

But language matters. In a global environment where regulatory alignment and ESG accountability are increasing, stepping back from clear commitments to environmental and social outcomes may risk the UK’s leadership position in sustainable finance.

The challenge now is to ensure that the Code’s implementation continues to drive high standards - particularly around ESG integration, engagement quality, and escalation practices. Simplification should not come at the expense of ambition.

Stewardship Still Matters - Now More Than Ever

Despite the concerns, one truth remains: the demand for strong stewardship isn’t going away.

Asset owners, clients, and civil society continue to expect that capital will be managed with integrity, foresight, and responsibility. The real test of the new Code will not be its wording -but how signatories act on it.

The best asset managers will take this as an opportunity to raise their game, not lower it. They’ll continue to report clearly, escalate when necessary, and align their strategies with the long-term interests of people and planet.

At Impactive, we've read our fair share of stewardship reports over the years (not always a thrilling task!), and we can confidently say: the best ones tell a story. A story of action, influence, and accountability. That’s what real stewardship looks like - and no change in phrasing should take us away from that.

And a Final Thought…

In this new era of streamlined stewardship, how you manage the engagement process - from tracking interactions to demonstrating outcomes - matters more than ever.

That’s where our Impactive Platform comes in. We're built for investors who take high-quality, outcomes-driven engagement seriously. Whether you're managing dozens of dialogues or escalating key issues, Impactive helps you stay organised, transparent, and aligned with your fiduciary goals.

And we’re going one step further: we’re currently testing a new AI-powered stewardship intelligence tool - designed to help you analyse and benchmark engagement activity across managers and markets with unprecedented clarity. The beta cohort is nearly full, but if you'd like early access when we launch more broadly, you can register your interest at info@impactive.pro