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As the Financial Reporting Council (FRC) unveils the UK Stewardship Code 2026, a wave of debate has swept across the UK’s investment and asset management landscape. This pivotal update—effective January 2026—reframes how stewardship is defined and practiced. While it promises reduced reporting burdens and sharper focus, its removal of explicit references to environmental and social concerns has ignited both criticism and reflection.
The Shift in Definition: Language, Intent, and Controversy
At the heart of the controversy lies a subtle but significant change in the Code’s definition of stewardship. The 2020 version defined stewardship as:
“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.”
The new 2026 definition reads:
“The responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.”
The omission of “economy, environment and society” has not gone unnoticed. Critics argue that this change weakens the ESG (Environmental, Social and Governance) underpinnings that had become core to stewardship practices in the post-2020 era.
Sarah Wilson, CEO of Minerva Analytics, called the change “disappointing” and accused the FRC of bowing to political pressures. Similarly, Oscar Warwick Thompson of the UK Sustainable Investment and Finance Association (UKSIF) warned of “mixed signals” being sent to investors. Despite a supporting statement referencing “wider systems,” many feel this nuance lacks the clarity and commitment that the previous Code embodied.
A Lighter Regulatory Touch? Or Just a Sharper Lens?
The FRC justifies the change as a move towards financial materiality, aiming to eliminate performative ESG disclosures in favor of more focused, outcome-oriented stewardship. According to FRC CEO Richard Moriarty:
“The Code is not prescriptive and does not direct how any signatory should choose to invest. It takes a principles-based approach focused on delivering long-term sustainable value.”
Supporters argue that this approach could reduce greenwashing and help shift ESG from checklists to real-world results. Critics, however, see a dangerous precedent in sanitizing ESG language at a time when climate urgency and social instability demand more—not less—explicit commitment.
Industry Reactions: From Skepticism to Strategic Pause
For some institutional investors, the jury is still out. Adam Matthews, Chief Responsible Investment Officer at the Church of England Pension Board, stressed that the true test of the Code’s credibility lies in uptake:
“We will be reflecting carefully… whether the code best serves our members’ long-term interests.”
He hinted that asset owners might seek to define stewardship standards independently if the new Code fails to align with their expectations and fiduciary duties.
Meanwhile, UKSIF and the PLSA (Pensions and Lifetime Savings Association) had actively campaigned to retain ESG-specific language in the Code—efforts that ultimately did not succeed, further fuelling sectoral frustration.
A Spotlight on Service Providers
One novel feature in the 2026 Code is the introduction of dedicated principles for service providers, such as proxy advisors and engagement consultants. This addition marks a significant shift, acknowledging the growing influence of third-party providers in shaping investor behavior.
However, reactions remain mixed. Wilson suggests that the FRC’s inclusion of this section may have been influenced by political narratives around the reliability of proxy advisors:
“It’s disappointing to see the FRC succumb to ongoing lobbying… service quality is taken extremely seriously.”
Yet UKSIF welcomed this move as part of a broader effort to strengthen the stewardship ecosystem.
Context: ESG’s Transformation and the Global Landscape
This regulatory shift comes at a time of transformation in ESG itself. Political polarization, investor skepticism, and increased scrutiny have reshaped how ESG is practiced globally. Despite these headwinds, commitment to sustainable investing remains robust:
- 87% of institutional investors maintain ESG objectives.
- 84% expect the pace of sustainability progress to continue or accelerate by 2030.
- 59% are pivoting to thematic ESG investing, focusing on areas like energy transition, low-carbon assets, and active ownership.
Findings from BNP Paribas’ 2025 ESG Survey suggest a maturing ESG sector. Investors are moving away from broad labels and toward precision, impact, and financial alignment. Key priorities for the next two years include:
- 49% increasing allocations to energy transition assets
- 47% using active ownership to drive ESG goals
- 46% divesting from carbon-intensive holdings
The evolution of ESG, then, is not a retreat—but a recalibration.
Looking Ahead: A New Stewardship Paradigm?
The revised UK Stewardship Code seeks to reduce reporting burdens—by up to 30%—and support long-term value creation through more flexible and targeted principles. For many, this could unlock deeper engagement and improve the quality of disclosures. For others, it’s a sign of retreat from the broader responsibilities investors hold in shaping a sustainable future.
The key question remains:
Can the concept of “sustainable value” still implicitly carry the environmental and social dimensions necessary for long-term resilience? Or has the omission of those terms opened a gap that future reforms may struggle to close?
The 2026 Code may not mark the death of ESG in stewardship—but rather a turning point. Whether this evolution is ultimately a step back or a step forward will depend not just on definitions, but on practice. What investors choose to prioritize, disclose, and measure will shape stewardship in the UK and beyond.
As the global ESG landscape becomes more focused, data-driven, and accountability-oriented, the UK’s next phase of stewardship will be scrutinized not just by regulators—but by society, beneficiaries, and markets alike.
Attend our upcoming Europe | Certified Sustainability (ESG) Practitioner Program, Advanced Edition 2025, on June 25-26 & 27, to navigate the evolving landscape of ESG and stewardship. The Program equips professionals with the latest tools, insights, and strategies to ensure their ESG practices remain impactful, credible, and aligned with global standards amidst regulatory changes.
