The Financial Reporting Council (FRC), the UK’s financial reporting regulator, has published new guidance to help asset owners, managers and service providers prepare for the updated UK Stewardship Code, which takes effect on 1 January 2026.

The Stewardship Code sets out expectations for how institutional investors oversee and engage with the companies in their portfolios to support long-term, stable investment returns. Through transparent reporting, the code aims to strengthen accountability between investors and the businesses they own.

“The new code has paved the way for signatories to streamline their reports without reducing the quality and usefulness of the information included,” said Mark Babington, Executive Director of Regulatory Standards at the FRC.

The new publication, ’Preparing for the UK Stewardship Code 2026: applying insights from current reporting’, offers practical examples of effective reporting under the 2020 Code to help signatories adapt to the revised framework. 

It highlights how to demonstrate policies, engagement outcomes and oversight of external managers in line with the code’s new two-part model, which separates less frequent policy and context disclosures from annual activities and outcomes reports.

According to the FRC, the 2026 Code is designed to reduce reporting burdens while maintaining the high standards that underpin its global reputation. Existing signatories will retain their status through 2026 as part of a transition year.

However, the revamp has proved controversial among some stakeholders. Critics have argued that the updated definition of stewardship risks weakening the environmental and social dimensions that previously anchored the code, prompting a wider debate about the balance between financial oversight and sustainability objectives.

Separately, the FRC issued International Standard on Sustainability Assurance (UK) 5000, ‘General Requirements for Sustainability Assurance Engagements’, which aims to provide UK companies, investors and assurance providers with a consistent, internationally aligned assurance standards for voluntary use in sustainability assurance engagements.

ISSA (UK) 5000 is a UK version of the global benchmark standard for sustainability assurance, developed by the International Auditing and Assurance Standards Board.

Governments must intensify support for private-sector decarbonisation, according to a report marking ten years since the Paris Climate Agreement, which warns of increased lobbying and slowing policy action in Europe and the US.

‘Policy Matters: From Pledges to Delivery’, released at COP30 by the UN-backed Taskforce on Net Zero Policy (TNZP), said climate policy signals to corporates and financial institutions were “too fragmented” to prompt action.

The global update of net zero policy progress also found that the centre of gravity was shifting southward towards Asia Pacific, “amid US rollback and EU recalibration”.

Separate research into sovereigns’ climate change performance by the TPI Global Climate Transition Centre at the London School of Economics revealed that China and Brazil had the largest pipeline of renewable energy capacity among 85 high-, middle- and low-income countries.

According to the TNZP, the number of targeted net zero regulations in G20 countries has tripled since 2020, the report acknowledged. Jurisdictions covering more than 60% of global GDP are adopting or progressing towards disclosure standards aligned with the International Sustainability Standards Board.

While conceding temporary overshoot was almost inevitable, the report said limiting climate change to 1.5ºC remains within long-term reach – albeit dependent on “accelerated and better coordinated action” by governments to enable companies and financial institutions to deliver on the transition.

The taskforce called for integrated, granular policy frameworks that enable transition planning in line with transparent, economy-wide net-zero goals and interim climate targets.

Other recommendations included adoption of resilience-focused policies, support for high-integrity carbon credit markets, and enhanced accountability and transparency, including mandatory disclosures.

The TNZP also called for greater transparency and disclosure of lobbying practices, particularly through trade associations, aligning with investor expectations for responsible corporate engagement.

Its recommendations echoed groups representing institutional investors in the ‘Global Sustainable Investment Review 2024’, released this week, which said fractured political consensus was “reducing the investment rationale for the movement of capital towards sustainable projects and assets”.

The TNZP report underlined the need for governments to set and implement targets through for instance nationally determined contributions (NDCs), national adaptation plans and national biodiversity strategies and action plans.

Earlier this week, the UN Climate Change Secretariat released an updated NDC synthesis report, based on 86 NDCs – which outline climate action strategies – submitted by 113 countries.

It projected that global greenhouse gas emissions would be around 12% below 2019 levels by 2035, compared with a projected emissions increase of 20-48% before the adoption of the agreement.

Last week’s Brussels plenary vote delaying agreement on Europe’s Sustainability Omnibus package could prolong timelines for updating green fund rules in the Sustainable Finance Disclosure Regulation (SFDR), potentially by more than 18 months.

MEPs voted against a compromise deal which would pare back reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), meaning the European Parliament has not finalised its position ahead of trilogue negotiations with EU member states.

According to Richard Gardiner, Interim Head of EU Policy at environmental charity ShareAction, linkages between the omnibus and the SFDR review mean the latter may not be published as scheduled in November.

“Given we will most likely not have a deal on the corporate reporting rules until the end of the year, you’d have to think that that will have an impact,” said Gardiner, speaking on Sustainable Investor’s ‘Risk, Return and Responsibility’ podcast.

Certainty on corporate sustainability reporting rules for European firm is seen as a prerequisite for setting new requirements for asset managers regarding categorisation, construction and disclosures for sustainable investment vehicles.

The European Commission is expected to propose new fund categories in its SFDR review, including one focused in transition-related investments. Gardiner warned that the changes to European legislative procedures by the omnibus process could also add a further layer of uncertainty.

“Even when the proposal comes out, given the fact that the process so far has been quite different, it’s going to be difficult to understand how you can predict the process of when you will have an answer. It used to be that you could always say 18 months, a year maybe, now you really don’t know,” he said.

The omnibus package will now go back for another round of negotiation in the European Parliament following fractious discussions in which the centre-right European People’s Party threatened to rely on support from hard-right parties to push through its proposals.

Gardiner said he regarded the parliament’s final position on the omnibus as “completely unknown” at this stage, causing extended uncertainty for asset managers and corporates.

“If they’re trying to plan a two, three, four-year horizon for systems or if they have SFDR systems in place [and are wondering] how they alter them, it’s very difficult to say for sure what they should be doing at the moment,” he added.

ShareAction was one of seven signatories to a letter calling on EU Commissioners to make stewardship requirements a core part of the SFDR review.

The second episode of Risk, Return and Responsibility will be published later this week.