The Financial Reporting Council (FRC) has made what it describes as “significant revisions” in a set of interim changes to reporting requirements under its Stewardship Code.

The shakeup is a partial response to an ongoing FRC listening process with capital markets stakeholders to help shape a new version of the Code, set to launch in 2026.

Defining stewardship as “the responsible allocation, management and oversight of capital”, the Code requires signatories to meet reporting expectations under the headings of Context, Activity and Outcome. It also classes signatories as Asset Managers, Asset Owners or Service Providers. 

Under the changes, signatories are no longer required to update disclosures against Context-related expectations, except where there have been material changes to information in previous disclosures.

Asset Owner and Asset Manager signatories are no longer required to disclose against Activity and Outcome reporting expectations for Principles 1, 2, 5 and 6 of the Code, except in the event of material updates.

In other reporting areas where there have been no material changes, signatories are free to simply cross-reference to specific, relevant disclosures made in their most recent Stewardship Report.

Alongside those points, the FRC has clarified for stakeholders what it considers to be an Outcome for stewardship purposes. It has also emphasised the scope for signatories to report against Principles 10 (collaborative engagement) and 11 (escalation) “where necessary”.

Immediate steps

The revisions aim to show stakeholders that the watchdog is taking into account and acting upon the views expressed as part of stage one of the listening process. In a special webinar on 24 July, FRC Head of Stewardship Andrea Tweedie said: 

“We heard during our conversations with our signatories and other stakeholders earlier this year that preparing Stewardship Reports is resource intensive. And what we’ve noticed as well, over the past few years of the Code in operation, is that reports have got longer and longer.”

She said that the FRC was demonstrating its responsiveness by taking some immediate steps to reduce the reporting burden on signatories, ahead of when a new Stewardship Code is implemented.

In particular, Tweedie noted, stakeholders raised concerns over Context reporting, which requires them to explain the policies, structures and processes they have in place around their handling of capital. “We’re hearing from a lot of our signatories that that isn’t changing a lot year on year,” she said. “So, we’re saying: ‘Don’t rewrite it if things haven’t changed’ – and you would be able to leave that in your previous Stewardship Report. But where there is a material change, you should include some new disclosure.”

Tweedie noted that the measures and clarifications don’t reduce the requirement for high-quality disclosures, but allow for more proportionate reporting. Crucially, she stressed, the changes have also been issued to provide stakeholders with flexibility. 

“Those who want to keep on reporting exactly as they do, who find it’s working well for them and that their stakeholders are responding well to it, are absolutely welcome to keep going,” she said. 

The changes will take effect for the Code’s next application deadline, which falls at the end of October.

The ‘Five Ps’

In addition to the reporting changes, the FRC announced that the remainder of its Stewardship Code Review would be driven by five themes:

1) Purpose 

The FRC will review whether its current definition of stewardship – noted above – adequately serves the aims that the Code should support. As such, the watchdog aims to produce an updated definition, set out what it should looklike in practice and explain how reporting against the Code can help stakeholders deliver on that new wording.

2) Principles 

The Code’s 12 Principles currently apply to Asset Managers and Asset Owners. With that in mind, the FRC is exploring a model to support reporting against the Code in a way that would recognise differences in signatories’ operating models. The regulator will also assess how the Principles can better reflect the wide range of assets that signatories are investing in. It is therefore considering ways to streamline both the Principles and reporting expectations.

3) Proxy advisers 

Through its listening, the FRC has picked up stakeholders’ concerns about the influence of proxy advisers: market research and data specialists who guide investors’ decision-making. It is “carefully considering” how the Service Providers Code could support greater transparency of proxy advisers’ activities.

4) Process 

As report preparation is particularly resource intensive, the FRC is considering ways to reduce reporting, while ensuring that the data required meets stakeholders' needs.

5) Positioning 

As the stewardship landscape includes many other regulators – for example, the Department for Work and Pensions, The Pensions Regulator and the Financial Conduct Authority – the FRC says that the new Stewardship Code must sit within that structure in a way that avoids duplication. It must also consider how signatories are impacted by multiple regulatory requirements.

Growth and effectiveness

In a statement, FRC CEO Richard Moriarty said the UK Stewardship Code was an important driver of the UK investment stewardship ecosystem. This safeguards the interests of all savers and pension holders by promoting the transparency and accountability of investors’ stewardship activities and decisions, as well as being adopted by global investors.

However, he noted: “It is right that we continue to challenge ourselves to ensure that the Code is operating in a way that is proportionate, minimises reporting burdens on signatories and supports the growth and effectiveness of the UK capital markets.”

ICAEW Corporate Governance and Stewardship Manager Victoria Geroe says that the Institute is ready to engage with the FRC to ensure that the UK Stewardship Code continues to be a world-renowned document. “It will be interesting to see how the FRC proceeds with this review and what ‘reduce reporting burdens’ will mean in practice, beyond these interim measures.”

She says that it is right for the FRC to review what material value reporting against the Code adds for businesses, and its aim to prevent duplicative and onerous reporting is well intended. “However, we caution against taking any action that would dilute the Code as it currently stands,” she warns.

ICAEW Head of Corporate Finance David Petrie adds: “Considered adjustments to the Code based on market consensus to offer flexibility, including the scope to report only significant changes, feel like a step in the right direction. But, when all is said and done, value and investment returns remain the key drivers for the attractiveness of the UK’s capital markets.”

For the next phase of its listening process, the FRC will host further engagements with stakeholders across August and September, focusing on the five themes. Later this year, it will launch a public consultation on the future shape of the Code. In the meantime, the watchdog has published a set of PDF quick guides that take a closer look at the interim measures:

Interim Changes to Reporting for Stewardship Code Signatories

Key Themes for remainder of the Stewardship Code Review

FAQs and clarifications on interim reporting measures for Stewardship Code signatories