The Financial Reporting Council (FRC) has defended its updated definition of stewardship in the UK Stewardship Code, despite signatory pushback.
This comes after the UK’s reporting regulator announced a number of interim changes to the Code following the launch of a fundamental review of it last year.
Pushback has focused on the proposals to drop explicit references to ‘environment and society’ in the new definition of stewardship, among others.
The proposed new definition, announced last year, scraps the reference to “leading to sustainable benefits for the economy, the environment and society”, instead referring to its aim being “to create long-term sustainable value for clients and beneficiaries”.
The Code is part of the investment stewardship eco-system in the UK, safeguarding the interests of the public and pension holders by promoting transparency and accountability, and is also adopted by global investors.
The change drew criticism from NGO ShareAction at the time, while others have said a greater conversation around the fundamental purpose of stewardship needs to be had.
Andrea Tweedie, head of stewardship at the FRC, said: “There are some people who say that the definition should be going a lot further, and it should be much stronger on the link between economy, environment and society. But we’ve also heard from others who even think that what we’ve proposed has gone too far and we shouldn’t have the words ‘long term’ or ‘sustainable’ in there.”
The FRC has said that the proposed changes aim to lessen reporting requirements and provide a more flexible framework for signatories to interpret the guidance in a way that aligns with their own business models and investment strategies.
Having been last reviewed in 2019 with a revision due to take place in 2024, its principles are designed to encourage alignment of incentives through the investment chain for the benefit of the investment beneficiary, the FRC said.
The Council further emphasised that it does not want to prescribe a specific definition of “long-term” or “sustainable” for signatories.
Last year, the Institutional Investors Group on Climate Change (IIGCC) also urged the FRC to consider how the revised UK Stewardship Code could be enhanced to help meet the challenges of the net zero transition, while urging for improved interoperability with other sustainability reporting requirements.
The consultation period closes on 19 February, with the revised Code expected to be published in early 2026.
Recommendations for the sustainability assurance market
The FRC has today published the final report from its market study into the assurance of sustainability reporting.
In the report, the FRC has recommended three key actions to support the market’s development:
- establish a clear UK policy framework for sustainability assurance that provides medium-term certainty for providers and reporters, supports investment, and aligns with international frameworks where appropriate;
- create a unified regulatory regime that consolidates standard setting, oversight, enforcement, and market monitoring to maximise certainty for companies, providers, and investors;
- improve the calibre of available information on the quality of sustainability assurance to support how the assurance market functions.
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