UK Stewardship Code Overhaul- Integration or Erosion?

UK Stewardship Code: ESG Integration or Erosion?

This month, the Financial Reporting Council (FRC) released a substantially revised version of the UK Stewardship Code. The update reflects a broader regulatory shift aimed at easing the burden on capital markets, supporting economic growth, and refining the role of stewardship in creating long-term value. However, one notable and symbolic change stands out: the removal of the term “ESG” from the formal definition of stewardship.

What’s New?

• Revised Definition: The previous Code defined stewardship as promoting “sustainable benefits for the economy, the environment and society.” The new definition has been simplified to “Responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.”

  
  
  
  

• Reduced Reporting Requirements: Signatories will now benefit from up to 30% fewer pages in stewardship reports. The revised Code also allows for cross-referencing previously disclosed content, reducing duplication and streamlining the reporting process

  
  

What Does the Removal of ‘ESG’ Signify?

The FRC has explicitly aligned this revision with the government’s push for a lighter regulatory touch and increased market competitiveness. The removal of ESG language is widely seen as an attempt to sharpen focus on financial materiality and core stewardship responsibilities.

Supporters argue that previous versions of the Code encouraged “performative” ESG disclosures—lengthy, boilerplate reports often overlooked by end users. By contrast, the updated Code could prompt more focused, impactful reporting that better serves the needs of clients and beneficiaries.

A Step Backward or a Deeper Integration?

For many, the removal of explicit environmental and social references has sparked concern and criticism. Civil society groups, asset owners, and sustainability advocates fear the change dilutes the broader purpose of stewardship—especially at a time of climate urgency, social inequality, and economic volatility.

Others argue that this shift may represent a more mature integration of ESG principles, embedding them not as standalone terms but as implicit components of what “sustainable value” truly means. Could this redefinition promote more authentic, financially grounded ESG practices, rather than box-ticking exercises?

Looking Ahead

The revised Code will take effect from January 2026, with a new wave of stewardship reports expected later that year. The key question remains:Are we ready to interpret “sustainable” as encompassing not just financial outcomes, but also the interconnected pillars of environmental, social, and economic resilience?

Time will tell. What’s certain is that this evolution of the UK Stewardship Code will be closely watched—by markets, stakeholders, and society alike.