FRC: New UK Stewardship Code 2026 published

On 3 June 2025, the Financial Reporting Council (FRC) published an updated Stewardship Code, the UK Stewardship Code 2026, following a consultation process that ran from November 2024 to February 2025. It will apply from 1 January 2026 and replace the UK Stewardship Code 2020 (2020 Code).

The purpose of the UK Stewardship Code 2026 (2026 Code) is to establish the core Principles of effective stewardship and to set a high standard of transparency for asset owners and asset managers, and for the service providers that support them. The 2026 Code sets out 6 Principles for asset owners and asset managers. Applicants report against these Principles in their annual Activities and Outcomes Report (A&O Report) and all applicants are also required to submit a Policy and Context Disclosure every four years (P&C Disclosure). The FRC has published a short summary document summarising the 2026 Code.

Changes introduced in the 2026 Code

Key changes from the 2020 Code include the following:

• New definition of stewardship – This is now defined as follows: Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries. This differs from the definition proposed by the FRC in the consultation and takes account of stakeholder feedback received.
• Structure of reporting - To reduce the burden of preparing reports, the structure of reporting will make the P&C Disclosure, which contains information that may not change much each year, and the annual A&O Report which is more dynamic, more distinct. The FRC had proposed that signatories should have to submit the P&C Disclosure each year irrespective of any changes, but in fact will continue to require signatories to submit the P&C Disclosure every four years only. However, signatories may choose to submit the P&C Disclosure annually alongside their A&O Report if they want to.
• Flexible reporting structure - Signatories must include all information necessary for the P&C Disclosure, and to demonstrate their application of the Principles within their A&O Report. Where applicants choose to make their P&C Disclosure and A&O Report separately, applicants may point to information in the P&C Disclosure from their A&O Report and vice versa. The P&C Disclosure and A&O Report may link to more detailed information outside of that provided to the FRC, but this will not form part of the FRC’s assessment.
• Reduced reporting burden - The 2026 Code includes fewer Principles and shorter 'how to report' prompts instead of detailed reporting expectations, with the aim of helping to eliminate 'box-ticking' approaches to reporting against the Principles. 
• Targeted Principles - The 2026 Code includes dedicated Principles for different types of signatories, including asset owners, asset managers, and for the first time, specific targeted Principles for proxy advisors, investment consultants, and engagement service providers.
• Guidance accompanying the 2026 Code – Guidance (currently in draft)is being introduced to assist applicants reporting to the 2026 Code. The guidance is not prescriptive but contains suggestions for some of the information applicants might wish to include when they report to help explain their approach to stewardship. It includes suggestions for those managing asset classes other than listed equity on how to report to the Principles of the 2026 Code. It also covers both the P&C Disclosure, and the Principles to be reported on in the annual A&O Report. Comments on the draft guidance are requested by 31 August 2025 and the FRC will finalise it in Autumn 2025.

Timing

The FRC states that to support signatories in adapting to the 2026 Code, 2026 will be a transition year. All existing signatories submitting a renewal application will remain on the signatory list throughout this period. This approach recognises that these organisations have already met the requirements to become a signatory of the 2020 Code and encourages them to embrace the updated, more flexible reporting framework without an immediate assessment of their reporting by the FRC.

Organisations that are current signatories to the 2020 Code and are scheduled to report in the autumn cycle will still be expected to submit their stewardship reports by the deadline of 31 October 2025, in accordance with the principles and reporting expectations of the 2020 Code.

New applicants in 2026 (those not listed as signatories to the 2020 Code in 2025) will still be subject to the full assessment process. 

(FRC, UK Stewardship Code 2026, 03.06.2025 and UK Stewardship Code 2026)

(FRC, Feedback Statement – UK Stewardship Code 2026, 03.06.2025)

FCA: Updated version of Enforcement Guide published

On 3 June 2025, the Financial Conduct Authority (FCA) published an updated version of its Enforcement Guide (now to be known under the new acronym ENFG, in place of the old ENF), which came into force on 3 June 2025. The FCA has implemented the bulk of its proposed changes to streamline its enforcement guidance, although there are some areas where it has decided not to take proposals forward or clarified the drafting which had been proposed in the consultation.

Key points include confirmation of the FCA’s approach in connection with:

• investigation announcements:
• legal advisers at compelled interviews;
• sharing of privileged material; and
• future consultation on the ENFG.

Further information is available here.

GC100 and Investor Group: Directors’ Remuneration Reporting Guidance

On 5 June 2025, the GC100 and Investor Group (Group) published updated Directors' Remuneration Reporting Guidance (Guidance). First published in 2013, and most recently updated in 2019, the Guidance is designed to assist companies in complying with key elements of the different regulations relating to remuneration reporting.

The Guidance takes account of recent changes introduced by the Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 which came into effect on 11 May 2025 (see further here). In addition, changes have been made to the Guidance to reflect evolving best practice. Key changes in this respect include new guidance on the following:

• Engagement with shareholders and consideration of shareholders’ views: The Guidance notes that Provision 41 of the 2018 (and 2024) UK Corporate Governance Code requires disclosure of the engagement which has taken place with shareholders and the impact this has had on remuneration policy and outcomes. It states that there should be a description of the proportion of a company’s shareholder register which was consulted and how any feedback was taken into account in the remuneration committee’s process and its impact on any policy and pay decisions. Disclosure should include the consultation with shareholders on issues such as substantial changes in performance measures/targets, or in quantum. Companies should also disclose the timetable of any consultation, and how they have dealt with a substantial vote against any remuneration resolution in a previous meeting.
• Environmental, social and governance (ESG) measures in variable pay: The Guidance notes that ESG measures are increasingly being used in variable pay. Investors expect that companies should consider using ESG metrics where they relate to operational or strategic objectives that promote long-term value creation for stakeholders. ESG metrics should be quantifiable, and the method of performance measurement well explained, suitably stretching, objective and clearly linked to implementing company strategy. It would be best practice for the non-financial KPIs to refer to metrics that are already being publicly reported in the company’s strategy, ESG roadmap and sustainability reporting.
• Consideration of general workforce pay: The Guidance notes relevant disclosure requirements set out in the UK Corporate Governance Code in relation to this. It points out that companies are expected to outline why the remuneration levels and maximum opportunities are appropriate for the specific circumstances of the company and its material stakeholders, including the workforce. For example, they could include more granular information or additional disclosures on pay distribution throughout the workforce. Where relevant, it may also be helpful for companies to include information such as reporting on staff with pay awards of over a certain amount, higher pay bands for the company’s employees, pay levels across the workforce and the number of employees in a range of different pay bands.
• Potential windfall gains: The Guidance states that investors generally expect that where there has been a material fall in share price over the year (during the period between two consecutive actual and/or proposed grant dates), companies consider reducing the grant size of long-term incentive awards to prevent the potential of windfall gains at vesting (and thus executives benefitting from being granted significantly more shares as a result of the fall in share price). The reasons why remuneration committees have, or have not, deemed it appropriate to reduce grant sizes should be clearly disclosed. Similar considerations should be provided in respect of the decisions at vesting so shareholders can assess the appropriateness of these decisions.

The updates also clarify the overlapping requirements of the UK Corporate Governance Code on significant votes against any resolution, employee consultations and workforce pay and conditions.

(GC100 and Investor Group, Directors’ Remuneration Reporting Guidance 2025, 05.06.2025)