ESG and Pensions: Getting ready for the UK Stewardship Code 2026

The UK Stewardship Code 2026: A New Chapter in Responsible Investment

The Financial Reporting Council (FRC) has now published the finalised UK Stewardship Code 2026, which will replace the 2020 version and take effect from next year. 

New UK Stewardship Code 2026 published - Burges Salmon

This updated voluntary framework for asset managers, asset owners, and service providers is designed to uphold high standards of stewardship and transparency, while also aiming to streamline reporting obligations and reduce unnecessary burdens on investors and their advisers.

In our earlier article on the consultation phase of the Stewardship Code, we explored the FRC’s proposals and the responses from key stakeholders such as the PPF and PLSA. Now, with the final version of the Code published on 3 June 2025, we take a closer look at the key changes, expectations, and implications for asset owners, managers, and service providers.

A New Framework for Modern Stewardship

The UK Stewardship Code 2026 builds on the 2020 edition but introduces a more structured, transparent, and outcomes-focused approach to stewardship. It continues to operate on a voluntary, “apply and explain” basis, but with clearer expectations around reporting and governance.

The Code applies to:

• Asset owners – including pension schemes, insurers, foundations, endowments, LGPS pools, and sovereign wealth funds.
• Asset managers – managing assets on behalf of UK clients or investing in UK assets.
• Service providers – such as investment consultants, proxy advisors, and engagement providers.

Dual Reporting Structure: Policy and Practice

A key innovation in the 2026 Code is its two-part reporting structure, designed to distinguish between an organisation’s stewardship intent and its actual delivery:

1. Policy and Context Disclosure (every 4 years or upon material change):
   This report outlines the organisation’s governance, resourcing, and stewardship policies. It must be approved by the governing body and signed by a senior leader (e.g. Chair, CEO, or CIO).
2. Activities and Outcomes Report (annually):
   This report demonstrates how the organisation has applied the Code’s Principles in practice, including the outcomes achieved. It can be submitted as a standalone document or combined with the Policy Disclosure.

Organisations may choose to report principle-by-principle or adopt a narrative approach, which promotes flexibility. 

Core Principles

The 2026 Code retains the core Principles of effective stewardship, but with enhanced clarity and guidance. These include:

• Purpose, strategy, and governance
• Conflicts of interest
• Monitoring and engagement
• Escalation
• Collaboration
• Exercising rights and responsibilities
• Reporting and transparency

The FRC has also issued draft guidance to support applicants in preparing their submissions, with final guidance expected in autumn 2025.

Governance and Accountability

A significant shift is the emphasis on board-level accountability. Both reports must be reviewed and approved by the organisation’s governing body, reinforcing stewardship as a strategic priority rather than a compliance exercise.

This aligns with broader regulatory trends, including the FCA’s Sustainability Disclosure Requirements (SDR) and the evolving expectations around ESG integration and fiduciary duty.

Implications for Pension Schemes and Trustees

For pension schemes—particularly those aspiring to demonstrate leadership in ESG and responsible investment—the 2026 Code offers a valuable framework. It encourages schemes to:

• Align stewardship with member outcomes and long-term value.
• Strengthen oversight of asset managers and service providers.
• Improve transparency to beneficiaries and regulators.

Trustees will need to ensure that their investment governance structures are fit for purpose, with clear delegation, monitoring, and escalation processes.

One element of this is the extent to which pension trustees can direct their external managers and it is helpful that the Code states that this may vary depending on scheme size and that reporting that explains this is encouraged. For example, a small pension fund may not undertake engagement and voting directly and would not report on Principle 3 (engagement) or Principle 4 (exercising rights and responsibilities). Instead, the scheme would report on oversight of their manager's activities in Principle 5 (selection and oversight of managers). A larger pension fund may also invest through external managers but they may take a more active role in stewardship and undertake some direct engagement with invested companies. They should therefore report on Principle 3 (engagement) as well. 

What’s Next?

The UK Stewardship Code 2026 reflects a maturing view of stewardship – not just as a compliance obligation, but as a strategic lever for long-term value creation, risk management, and societal impact.

As the FRC opens its first application window in Spring 2026, organisations should begin preparing now. This includes reviewing existing policies, engaging with service providers, and planning for board-level sign-off.

The 2026 Code sets a new benchmark for stewardship in the UK. It challenges investors to move beyond policy statements and demonstrate real-world impact. For those willing to lead, it offers a platform to build trust, accountability, and long-term resilience.

This article was written by Alex Bones, trainee solicitor, and Kate Granville Smith, Director in our Pensions and Lifetime Savings Team. 

“Stewardship is an important part of fulfilling an investor’s fiduciary duty, and reporting to the Code can help organisations demonstrate how their stewardship supports them to meet their fiduciary duties. The Code does not prescribe a single approach to effective stewardship. Instead, it allows organisations to set out how they meet the expectations in a manner that is aligned with their own business model and strategy.” UK Stewardship Code 2026

https://www.frc.org.uk/library/standards-codes-policy/stewardship/uk-stewardship-code/