‘Stewardship shouldn’t feel like box-ticking’ – FRC chief
The head of the Financial Reporting Council (FRC) has told City PM the stewardship code has been overhauled with a specific focus on “reducing the reporting burden.”
The accountancy watchdog publishes its updated UK Stewardship Code 2026 today, detailing the changes it will make to its set of principles following a consultation involving over 1,500 stakeholders.
Signatories are required to report publicly on their stewardship activities and outcomes annually.
However, as the regulator noted, the investment market “has changed significantly” since the publication of its first code in 2010, which was established following the 2008 financial crisis.
Richard Moriarty, Chief Executive of the FRC, told City PM that the regulator has reduced the reporting burden and made it more flexible.
“The key is that the standards stay high, but the process becomes more practical and meaningful. We don’t want stewardship reports to feel like a box-ticking exercise. They should be useful, both for those writing them and those reading them,” he explained.
The code will now feature fewer principles and shorter ‘how to report’ prompts instead of detailed reporting expectations, helping to eliminate ‘box ticking’ approaches to reporting against the principles.
The FRC said early evidence suggests signatories may be able to reduce reporting volume by 20-30 per cent while maintaining quality.
Flexible approach to ESG
There will also be a significant change to environmental, social and governance (ESG) reporting.
Moriarty pointed out that “investors have to consider a wide range of issues when making investment decisions and undertaking stewardship, which includes ESG factors.”
“The new code doesn’t tell how or where to invest, but it does emphasise how transparency is integrated into effective stewardship,” he explained.
The full report details how a “flexible approach” to reporting allows organisations to demonstrate how have they have incorporated their priorities and objectives into their stewardship activities.
And for the first time, as reported in the Sunday Times, there will be a specific reference to proxy voting. The new code now targets specific principles for proxy advisors, investment consultants and engagement service providers.
Moriarty explained, “We recognise that the investment landscape has changed and that proxy advisors, investment consultants, and engagement service providers role in the investment chain has increased.”
He pointed out that “it is not for us to comment on the business models of organisations” though he added, “our principles on service providers promote better conversations between all actors in the ecosystem.”
The watchdog boss highlighted that “these updates are really about supporting a healthy investment ecosystem”, pointing out that “effective stewardship isn’t just a nice-to-have. It plays a key role in strengthening our capital markets.”
The new codes will be effective from January 1, but there will be a grace period for businesses to implement the new rules.