The Relatively Recent Publication of the UK Stewardship Code 2020 by the Financial Reporting Council (FRC) Provides Evidence that ESG (Environmental, Social, and Governance) Factors have Moved into the Mainstream for Investors

Abstract

This research paper explores the evolution and effectiveness of the UK Stewardship Code, particularly focusing on the 2020 version as a response to previous shortcomings identified in its 2010 and 2012 iterations. Initially aimed at improving shareholder engagement and corporate governance post-2008 financial crisis, the Code has progressively integrated environmental, social, and governance (ESG) considerations. The study critically evaluates the practical impact of both versions, addressing structural issues in investor engagement, functional and reputational incentives, and systemic challenges such as climate change. Through analysis of market dynamics, institutional investor behavior, and regulatory developments, the paper assesses how the second version of the Code seeks to realign stewardship with long-term value creation and societal interests. The findings suggest that while the 2020 Code enhances ESG integration and reporting standards, its success largely depends on reputational incentives, regulatory backing, and the broader willingness of investors to engage meaningfully with corporate governance reforms.

Keywords: UK Stewardship Code, Corporate Governance, ESG (Environmental, Social, and Governance), Institutional Investors, Shareholder Engagement, Reputational Incentives, Financial Reporting Council (FRC), Climate Change, Long-term Investment Strategy, Investment Stewardship, Asset Managers, Regulatory Framework, Kingman Review, Sustainable Finance, Investor Activism