TWSE Market Insights

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In recent years, expectations regarding the role of institutional investors in global capital markets have gradually shifted from “passive ownership” to “responsible oversight,” with stewardship serving as a central mechanism underpinning this transition. Traditionally, investors were regarded primarily as capital allocators, with their responsibilities focused on investment performance, asset allocation and risk management. However, as capital-market value chains have become more complex, passive investment has continued to expand, sustainability-related risks have grown, and corporate governance reforms have advanced, institutional investors are no longer merely external observers of listed-company governance. They have become important participants capable of influencing corporate strategy, capital efficiency, board effectiveness and long-term corporate value. Stewardship therefore requires asset owners, asset managers and related service providers throughout the investment chain to promote the long-term value of investee companies and discharge their responsibilities to clients and beneficiaries through monitoring, engagement, voting, disclosure and the management of conflicts of interest.

In 2025, both the United Kingdom and Japan completed revisions to their stewardship frameworks. Although the two jurisdictions differ in their institutional backgrounds, capital-market structures and regulatory cultures, their revisions reflect a common trend: stewardship is moving beyond policy documents, voting records and formal disclosure towards a greater emphasis on how stewardship is integrated into investment decisions, corporate engagement and the interests of beneficiaries. In June 2025, the United Kingdom published the UK Stewardship Code 2026, which took effect on 1 January 2026. The revised Code emphasises long-term sustainable value creation, reduced reporting burdens, greater disclosure flexibility, and enhanced transparency and accountability for service providers across the investment chain. The UK Financial Reporting Council (“FRC”) stated that the revised Code was developed following consultation involving more than 1,500 stakeholders and was intended to maintain high-quality stewardship standards while preventing reporting from becoming overly burdensome or degenerating into a box-ticking exercise.[1] Japan, meanwhile, published the third revised edition of its Stewardship Code on 26 June 2025. The Financial Services Agency of Japan (“FSA”) stated that the revisions were finalised following discussions by an expert panel beginning in October 2024 and a public consultation conducted from 21 March to 20 April 2025. The revisions continue the central theme of Japan’s recent corporate governance reforms by shifting the focus from form to substance, promoting more effective dialogue between investors and companies, and strengthening trust through collective engagement and greater transparency regarding beneficial shareholdings.[2]

The United Kingdom was one of the earliest capital markets to introduce a stewardship code. The development of its stewardship framework can be traced to the first UK Stewardship Code in 2010, followed by revisions in 2012 and 2020, and the publication of the 2026 Code in 2025. The UK framework has long exerted an international influence, reflecting the maturity of the country’s asset-management industry, the scale of its pension funds and institutional investors, and the emphasis placed by its corporate governance framework on the “apply and explain” approach and market discipline. The 2020 Code significantly raised reporting standards by requiring signatories to provide more comprehensive explanations of their stewardship activities and outcomes. Although this successfully improved the quality of stewardship reporting, it also increased reporting burdens, lengthened reports and, in some cases, resulted in overly complex disclosure. The 2025 revision was undertaken against this background. Its objective was to preserve the high standards that have made the United Kingdom a global benchmark for stewardship, while restoring clarity, readability, flexibility and an outcomes-oriented focus.

On 3 June 2025, the FRC published the UK Stewardship Code 2026.[3] The revised Code took effect on 1 January 2026. The FRC stated that the Code establishes a principles-based framework for high-quality stewardship reporting in support of economic growth and investment, with a focus on long-term sustainable value creation, reducing unnecessary reporting burdens and improving the quality of engagement among market participants. The revised Code provides a concise definition of stewardship:

“Stewardship is the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries.”

This definition has several important policy implications. First, it directly connects stewardship with capital allocation, indicating that stewardship encompasses not only post-investment voting and engagement, but also the investment process itself. Second, it places the interests of clients and beneficiaries at the centre of stewardship, thereby reducing the risk that stewardship may be misunderstood as an external instrument detached from investment objectives. Third, it identifies long-term sustainable value as the ultimate objective, demonstrating that environmental, social and governance considerations are not isolated concerns but form part of long-term investment returns and market stability, without relying exclusively on ESG terminology.

One of the most significant changes to the UK Code is the redesign of the reporting framework. Under the previous framework, signatories were generally expected to explain their organisational background, governance arrangements, policies and processes, resource allocation, activities, case studies and outcomes within a single annual report. This frequently led to repetitive disclosure. The revised Code divides reporting into a “Policy and Context Disclosure” and an “Activities and Outcomes Report.” The former covers relatively stable background information, including the organisation, governance, resources, policies, processes, management of conflicts of interest, and communication with clients or beneficiaries. In principle, it is submitted once every four years, or updated when a material organisational change means that the background disclosure is no longer consistent with the activities report. The Activities and Outcomes Report is submitted annually and focuses on the stewardship activities undertaken during the preceding 12 months and the outcomes achieved. This structure significantly improves reporting logic by eliminating the need to repeat information that does not change from year to year.

The revised reporting framework also reflects a second major theme of the UK reforms: reports should be clear and readable, rather than relying on the accumulation of information as a substitute for substantive explanation. The revised Code specifies that Activities and Outcomes Reports should be engaging and concise, and should make appropriate use of data, charts, examples and case studies. Reports should also be balanced and understandable. In addition to successful experiences, signatories may acknowledge setbacks, lessons learned and intended next steps.

This approach has important implications for stewardship reporting practice. In the past, some investor reports tended to focus exclusively on positive developments or the quantitative volume of activities—for example, the number of engagements, voting rates or meetings held—without explaining whether those activities contributed to improvements in corporate governance, strategy or capital efficiency. The revised Code calls for a narrative that is more closely connected to investment judgement, including how issues were selected, how resources were allocated, how dialogue progressed, what escalation measures were used, and how strategies were adjusted when objectives were not achieved.

Building on the 2020 framework, which already brought asset owners, asset managers and service providers within the scope of the Code, the UK Stewardship Code 2026 further streamlines and reorganises the principles and disclosure requirements applicable to different participants in the investment chain. The number of principles applicable to asset owners and asset managers has been consolidated from 12 to six, while the principles applicable to service providers have been reduced from six to four.

Asset owners and asset managers include pension funds, insurers, investment trusts, asset-management companies and other institutions that directly manage assets or do so on behalf of clients. Their core responsibility is to integrate stewardship into the investment process and promote long-term sustainable value for clients and beneficiaries by monitoring investee companies, conducting engagement, exercising voting and other rights, selecting and overseeing external managers, and managing service providers.

Service providers include proxy advisers, investment consultants and engagement service providers. They do not generally make investment decisions or exercise shareholder rights directly. Instead, they help asset owners and asset managers discharge their stewardship responsibilities more effectively by providing research, advice, voting support, engagement services and other professional assistance.

The revised Code establishes six principles for asset owners and asset managers:

1. Integrating stewardship and investment to create long-term sustainable value for clients and beneficiaries;
2. Identifying and responding to market-wide and systemic risks to promote well-functioning financial markets;
3. Engaging to maintain or enhance asset value;
4. Actively exercising rights and responsibilities;
5. Incorporating stewardship considerations into the selection and oversight of external managers; and 
6. Monitoring and holding stewardship service providers to account.

The first principle, “Integrating Stewardship and Investment,” may be regarded as the central principle of the revised UK Code. Signatories are expected to explain how material stewardship themes or issues are selected and prioritised, whether their approach differs across investment styles, asset classes or geographical regions, and how stewardship activities are integrated into investment processes. The FRC therefore does not intend stewardship to become an ancillary reporting exercise separate from investment management. Rather, investors are expected to explain how stewardship influences investment research, portfolio management, risk assessment, buy and sell decisions, and the ongoing monitoring of holdings.

For example, where an investor identifies capital allocation efficiency as an engagement priority, its report should not merely state that it has discussed capital policy with a number of companies. It should also explain how the issue relates to its investment thesis, corporate valuation, level of conviction or intended holding period.

The second principle, “Promoting Well-Functioning Markets,” reflects the increasing importance of systemic risk within stewardship. The revised Code requires signatories to explain the market-wide and systemic risks and opportunities they have identified, and how they have participated in public policy development, standard-setting or engagement with policymakers, standard setters, regulators and other stakeholders. Where escalation action has been taken, signatories should also explain the reasons for the escalation and the progress achieved.

This principle is particularly important because systemic risks cannot be fully eliminated through portfolio diversification. Climate change, financial instability, failures of audit confidence and inadequate market transparency are examples of risks that may affect the market as a whole. When investors face such risks, selling or reducing exposure to a single company may not adequately protect the interests of long-term beneficiaries. Market-level engagement, policy participation and support for improved standards may instead be necessary to strengthen the broader investment environment. This is one of the key reasons the revised UK Code treats stewardship as a means of improving the functioning of capital markets as a whole.

The third and fourth principles concern engagement and the exercise of rights, respectively. The revised Code requires investors to explain how engagement issues are selected and prioritised, the objectives and methods of engagement, and the progress made towards engagement objectives or outcomes, supported by relevant examples. For listed equities, investors are expected to provide a link to their voting records, disclose the proportion of eligible holdings voted, explain the rationale for selected voting decisions, state whether voting formed part of an escalation process, and identify voting-related conflicts of interest.

This reflects a more mature understanding of the relationship between engagement and voting. Voting is not a separate exercise detached from engagement. It is one means by which investors express their position on corporate matters, promote improvement and, where necessary, escalate their actions. Where an investor has engaged with a company over an extended period on matters such as board composition, capital allocation, climate strategy or remuneration arrangements, but its voting behaviour is inconsistent with the position taken during engagement, the credibility of its stewardship approach may be weakened.

The fifth principle concerns the selection and oversight of external managers and is particularly important for asset owners. Many pension funds, insurers and other asset owners do not manage all assets internally, but appoint external asset managers to do so. The revised Code requires such institutions to explain how stewardship considerations are incorporated into requests for proposals, mandate design, manager selection, ongoing oversight and, where necessary, escalation action against external managers.

This requirement makes the responsibilities of asset owners more explicit. Asset owners cannot treat the appointment of an external manager as relieving them of responsibility. They should establish clear expectations, oversee the quality of external managers’ engagement and voting activities, and ensure that their conduct is consistent with the interests of ultimate beneficiaries. This trend is relevant to capital markets globally. Although many stewardship frameworks require asset managers to disclose voting and engagement activities, they have historically devoted less attention to how asset owners shape behaviour throughout the investment chain through investment mandates and monitoring mechanisms.

The sixth principle brings service providers within the investor’s sphere of responsibility. Users of proxy advisory services are expected to explain how those services are used and how service quality and accuracy are monitored. Users of investment consultants should explain how they ensure that consultants support their stewardship objectives and how the quality of those services is monitored. Similarly, users of external engagement service providers should explain how the services support their stewardship objectives and how service quality is overseen.

The revised Code therefore requires not only transparency from service providers themselves, but also judgement and accountability on the part of investors that rely on external services. In particular, as the influence of proxy advisers has grown, investors that merely adopt voting recommendations mechanically may find it difficult to demonstrate that they have exercised judgement based on their own investment strategies and the interests of their clients.

The revised Code further reorganises the framework applicable to service providers into four principles. Service providers must explain their organisation and services, governance and resources, policies and processes, and management of conflicts of interest. Depending on the nature of the service provided, they must also explain how they ensure service quality and support clients in fulfilling their stewardship responsibilities.

For example, proxy advisers should ensure the quality and accuracy of their research, recommendations and voting execution. Investment consultants should assist clients in identifying and responding to market-wide and systemic risks. Engagement service providers should conduct engagement on behalf of clients to maintain or enhance asset value. These revisions further strengthen accountability throughout the investment chain. Modern stewardship is no longer a linear relationship between investors and investee companies. It involves an investment chain comprising asset owners, asset managers, proxy advisers, investment consultants, engagement service providers, and other data and research organisations.

Overall, the UK’s 2025 revisions may be summarised in four principal trends. First, stewardship has been re-anchored in long-term sustainable value creation, reducing the risk that it will be narrowed to ESG terminology or compliance disclosure. Second, the reporting framework has shifted from a single annual report to a layered structure comprising policy and context disclosures and annual activities and outcomes reporting, improving clarity and readability. Third, the emphasis has moved from listing activities to explaining outcomes, progress, setbacks and intended next steps. Fourth, accountability throughout the investment chain has been extended to service providers, particularly proxy advisers, investment consultants and engagement service providers.

The development of Japan’s Stewardship Code is closely connected with the country’s broader corporate governance reforms. Japan introduced the Principles for Responsible Institutional Investors, commonly referred to as the Japanese Stewardship Code, in 2014.[4] The Code was subsequently revised in 2017 and 2020, before its third revision was completed in 2025.

From the outset, the Japanese Code has sought to promote the sustainable growth and medium- to long-term corporate value of investee companies through constructive dialogue between institutional investors and companies. It has also served as a means of addressing issues in Japanese corporate governance relating to capital efficiency, board oversight, cross-shareholdings and shareholder rights. Compared with the United Kingdom, Japan’s stewardship framework is more directly embedded in national corporate governance reforms, capital-market revitalisation and corporate-value enhancement policies.

The FSA published the third revised edition of the Code on 26 June 2025. The background to the revision may be summarised as a movement “from form to substance.” In its explanation of the revisions, the FSA noted that, although a degree of progress had been achieved through the Stewardship Code and Corporate Governance Code since 2014, the sustainable growth and medium- to long-term value enhancement of companies could not be achieved through formal compliance alone. Voluntary changes in the mindsets of both companies and investors would also be required.

This observation addresses an important issue in Japan’s corporate governance reforms. Over the past decade, Japanese listed companies have made progress in appointing independent directors, publishing governance reports, increasing awareness of the cost of capital and expanding shareholder dialogue. Nevertheless, market participants continue to examine whether these reforms have genuinely changed corporate decision-making, particularly in relation to capital allocation, business portfolio restructuring, improvements in return on equity and price-to-book ratios, cross-shareholdings and substantive board oversight.

The revisions also respond to the FSA’s Action Program for Corporate Governance Reform 2024: Principles into Practice,[5] particularly by promoting collective or collaborative engagement and improving transparency regarding beneficial shareholdings, thereby supporting constructive dialogue between investors and companies. These two issues are highly significant for the Japanese capital market.

First, collective engagement enables investors to establish more effective dialogue on shared governance or capital-efficiency concerns, particularly where an individual investor has a limited holding, passive investment has increased, or a company has not responded adequately. Second, greater transparency regarding beneficial shareholdings helps companies understand their actual shareholder base and reduces information gaps created by nominee holders, custodial arrangements and intermediary institutions. Japan’s capital-market reforms place considerable importance on constructive dialogue between companies and investors, and transparent shareholding information provides an essential foundation for trust in that dialogue.

The revised Japanese Code retains its principles-based and “comply or explain” framework. It expressly states that it is neither legislation nor a legally binding set of rules. Instead, it adopts a principles-based approach and expects institutional investors to emphasise substantive implementation rather than merely satisfying individual requirements.

In its explanation of the revisions,[6] the FSA stated that the revision was intended to return to the fundamental spirit of a principles-based framework. Provisions that had become widely established in practice were deleted, consolidated or simplified in order to make the Code more concise and avoid rigid application. However, the deletion, consolidation or simplification of a provision does not mean that the underlying matter is no longer important. This approach is consistent with the UK’s efforts to reduce reporting burdens. Mature stewardship frameworks are increasingly recognising that a more detailed regime does not necessarily produce better outcomes; what matters is whether investors are able to exercise high-quality judgement in light of their own circumstances.

The Japanese Code defines stewardship responsibilities as the responsibilities of institutional investors to enhance the medium- to long-term investment returns of clients and beneficiaries by improving the corporate value and sustainable growth of investee companies. This is to be achieved through constructive engagement, or purposeful dialogue, based on an in-depth understanding of investee companies and their business environments, together with sustainability considerations consistent with the investors’ investment-management strategies.[7]

Compared with the United Kingdom, the Japanese definition places the corporate value of investee companies more directly at the centre of stewardship. This reflects the policy logic of Japan’s corporate governance reforms: investors should not intervene in companies merely in response to external or short-term market pressure, but should contribute to improved governance, greater capital efficiency, sustainable growth and higher medium- to long-term investment returns.

The revised Japanese Code retains its eight-principle structure. Principles 1 to 7 apply primarily to institutional investors, while Principle 8 applies to service providers to institutional investors.

Principle 1 requires institutional investors to establish and disclose a policy on how they fulfil their stewardship responsibilities. Principle 2 requires them to establish and disclose a policy for managing conflicts of interest. Principle 3 requires them to monitor investee companies on an ongoing basis and fulfil their stewardship responsibilities in a manner that supports the companies’ sustainable growth. Principle 4 requires them to seek a shared understanding with investee companies and work jointly to resolve issues through constructive engagement. Principle 5 requires them to establish clear policies on voting and voting disclosure. Voting policies should not operate as mechanical checklists, but should contribute to the sustainable growth of investee companies. Principle 6 requires institutional investors to report periodically to clients and beneficiaries on the fulfilment of their stewardship responsibilities, including the exercise of voting responsibilities. Principle 7 requires them to possess the expertise and resources necessary for appropriate engagement and judgement, and to conduct stewardship activities based on an in-depth understanding of investee companies and their business environments, incorporating sustainability considerations consistent with their investment strategies.

Principle 8 applies to service providers such as proxy advisers and investment consultants. It requires them to support institutional investors in fulfilling their stewardship responsibilities through the appropriate provision of services, thereby improving the functioning of the investment chain as a whole. Unlike the revised UK Code, which establishes separate principles for asset owners, asset managers and service providers, Japan continues to apply a more unified principles framework, while using the accompanying guidance to distinguish the responsibilities of different participants.

The revisions to Principle 4 concerning constructive engagement are particularly representative of the broader reform. The revised Code expects institutional investors to seek a shared understanding with investee companies through constructive dialogue in order to enhance medium- to long-term corporate value, capital efficiency and sustainable growth. Where monitoring and dialogue indicate that corporate value may be at risk of impairment, investors should request further explanation from the company and seek to develop a deeper common understanding in order to resolve the issue.

The expectation is therefore not merely that investors hold meetings with companies. Investors should identify specific issues based on their monitoring activities and conduct meaningful dialogue on matters such as management policy, capital efficiency, governance structures and risk management.

Notably, the revised Code also provides that, when requested by an investee company, an institutional investor should explain the extent of the shares it holds or beneficially owns, and should disclose in advance its policy for responding to such requests. This requirement is related to the transparency of beneficial shareholdings. If a company cannot understand the scale of the shareholding or the nature of the ultimate beneficiaries represented by the party with which it is engaging, it may be difficult to assess the significance or representativeness of the engagement issue. For investors, disclosing a policy for responding to such requests can reduce information asymmetry between companies and investors and help prevent uncertainty or mistrust during engagement.

This arrangement is also aligned with Japan’s recent efforts to promote dialogue between companies and shareholders, increase awareness of the cost of capital, and enhance corporate value.

Collective or collaborative engagement is another major feature of Japan’s 2025 revisions. The revised Code expressly recognises that, in addition to engagement between an individual institutional investor and an investee company, engagement conducted jointly with other institutional investors may be an important option. In determining the appropriate form of dialogue, investors should consider whether the method will facilitate constructive engagement and contribute to the sustainable growth of the investee company.

In its explanatory notes, the FSA also refers to clarifications concerning the scope of “joint holders” under the large shareholding reporting regime and “specially related parties” under the tender offer rules.[8] These clarifications are intended to reduce investor concerns that collective engagement could trigger shareholding disclosure requirements, tender offer regulations or similar obligations. The revision is of practical significance because many investors may not be unwilling to participate in collective engagement, but may be concerned that joint discussions could be regarded as acting in concert, create a joint-holder relationship or trigger other regulatory obligations. Clearer regulatory boundaries provide investors with greater scope to cooperate on matters of common market concern.

In relation to voting, the revised Japanese Code continues to emphasise the connection between voting and engagement. Institutional investors are expected, as far as possible, to exercise voting rights over their holdings and to make voting decisions based on their monitoring of and dialogue with investee companies. Voting policies should not operate as mechanical checklists, but should be designed to contribute to the sustainable growth of investee companies.

In this sense, voting should not be treated merely as an annual procedural exercise at the general meeting of shareholders. It is a tool through which investors maintain oversight, continue dialogue and, where necessary, express dissatisfaction or support for reform. Where an investor has adopted a clear engagement position on corporate governance, capital efficiency or management strategy, its voting behaviour should reflect that position. Otherwise, its stewardship activities may become merely formalistic.

The revised Code also expects investors to disclose aggregated voting records at least by major category of resolution. To improve the visibility of whether voting activities are consistent with stewardship policies, investors should disclose voting records on an individual investee-company and individual-resolution basis. Where such disclosure is considered inappropriate because of particular circumstances, the investor should proactively explain the reasons.

When disclosing voting records, investors should also clearly explain the reasons for votes on resolutions considered important from the perspective of constructive dialogue, including resolutions involving conflicts of interest or those for which the investor’s voting policy requires an explanation. The purpose is therefore not merely to publish a large volume of voting data, but to enable external users to understand the relationship between voting decisions and the investor’s stewardship policy.

For investors using proxy advisory services, the Japanese Code requires an understanding of the processes by which voting recommendations are developed, including the adviser’s staffing and operational resources. Investors should not rely mechanically on advisory recommendations, but should exercise voting rights based on their own responsibilities and judgement, taking into account their monitoring of and dialogue with investee companies. When disclosing voting activities, users of proxy advisory services should also disclose the name of the adviser and explain how its services were used in reaching voting decisions.

This approach is highly consistent with the revised UK Code’s requirement that investors monitor the quality and accuracy of service providers. Both jurisdictions recognise that proxy advisers exert considerable influence in global capital markets, but that their recommendations cannot replace investors’ own judgement.

Principle 7 of the Japanese Code emphasises capabilities, resources and governance structures. The revised Code expects institutional investors to possess the skills and resources required for appropriate engagement and judgement, and to establish the necessary internal structures. Senior management should have appropriate competence and experience to fulfil stewardship responsibilities effectively. It should also possess sufficient independence and avoid being influenced by biases arising from the financial group to which the institution belongs.

The management of an asset manager should recognise the important role it plays in strengthening governance and managing conflicts of interest. This requirement reflects concerns regarding potential conflicts within Japanese financial groups. Commercial relationships involving banks, securities firms, asset managers or insurers within the same group may influence voting or engagement decisions concerning investee companies. Stewardship cannot produce substantive results unless it is supported by adequate resources, professional expertise and governance independence.

The revised Code further requires institutional investors to review their implementation of the principles and guidance at appropriate intervals in order to improve the quality of their stewardship policies and activities. Asset managers, in particular, should periodically conduct self-assessments of their implementation of the principles and guidance, disclose the results, and use the process to improve governance structures, conflict-of-interest management and stewardship activities. The results should be disclosed together with the outcomes of stewardship activities, including corporate engagement.

This requirement is closely connected with the shift from form to substance. Self-assessment should not be treated merely as an internal compliance exercise. It should examine whether stewardship activities are genuinely aligned with investment-management strategies, whether they contribute to the medium- to long-term value of investee companies, and whether they enable asset owners to select and evaluate asset managers more effectively.

In relation to service providers, Principle 8 requires service providers to institutional investors, including proxy advisers and pension investment consultants, to identify specific circumstances in which conflicts of interest may arise, establish clear and effective conflict-management policies, and disclose the measures adopted.

Proxy advisers should maintain appropriate and sufficient human and operational resources, communicate effectively with companies and other stakeholders, and disclose their voting-recommendation processes in sufficient detail to ensure transparency. Recommendations should be based on information disclosed by the company, and proxy advisers should actively exchange views with companies where necessary. Where a company covered by a voting recommendation requests an opportunity to do so, the proxy adviser should allow the company to verify the factual accuracy of the information on which the recommendation is based and should communicate the company’s views to its clients together with the recommendation.

These requirements reflect Japan’s emphasis on the localisation and factual accuracy of proxy advice, as well as the right of companies to communicate with advisers. They also respond to longstanding concerns among companies that proxy recommendations may be overly mechanical or may not sufficiently account for Japanese corporate structures or the circumstances of individual companies.

Overall, Japan’s 2025 revisions may be summarised in five principal areas. First, the focus of reform has shifted from formal compliance to substantive outcomes, with an emphasis on changes in the mindsets of both investors and companies. Second, the revised Code promotes collective engagement, enabling investors to cooperate on material governance or corporate-value issues within appropriately clarified regulatory boundaries. Third, it improves transparency regarding beneficial shareholdings and shareholding information, thereby strengthening trust between companies and investors. Fourth, it requires voting, engagement and monitoring to be mutually connected, reducing the risk that voting policies will become mechanical checklists. Fifth, it strengthens the transparency, conflict-of-interest management and information quality expected of proxy advisers and other service providers.

Although the United Kingdom and Japan revised their stewardship frameworks in response to different market conditions, their 2025 reforms reveal several common directions in the global development of stewardship.

First, stewardship frameworks are placing greater emphasis on long-term value creation rather than mere compliance disclosure. The United Kingdom expressly defines stewardship as the responsible allocation, management and oversight of capital to create long-term sustainable value. Japan defines stewardship as constructive dialogue that enhances the corporate value and sustainable growth of investee companies, thereby improving medium- to long-term investment returns for clients and beneficiaries. Both approaches demonstrate that the legitimacy of stewardship is grounded in fiduciary responsibility and investment purpose, rather than in external requirements detached from the investment mandate.

Second, stewardship reporting is shifting from the disclosure of institutional arrangements to the disclosure of activities and outcomes. Market participants will no longer be satisfied merely by an investor stating that it has adopted a policy, established a committee or published voting records. They will increasingly examine how issues are selected, how companies are engaged, how voting and escalation strategies are used, whether progress is monitored, and how outcomes are communicated to clients and beneficiaries. The United Kingdom has introduced a layered structure of Policy and Context Disclosures and Activities and Outcomes Reports, reducing repetitive reporting and sharpening the focus of annual disclosures. Japan, through its principles-based framework and self-assessment expectations, similarly requires investors to return to substantive implementation.

Third, engagement has become the central element of stewardship, and the quality of engagement is likely to replace the number of engagements as the key measure of effectiveness. The UK Code requires investors to explain the objectives, methods and prioritisation of engagement, as well as outcomes and escalation. The Japanese Code expects investors to develop a shared understanding with investee companies through dialogue and, where risks to corporate value are identified, to request further explanation and seek solutions.

High-quality engagement should therefore be more than a meeting record. It should contain a clearly defined issue, an investment rationale, the company’s response, subsequent monitoring, and a connection with voting decisions. For institutional investors, engagement should not be confined to annual company visits or questionnaires, but should form part of investment research and the ongoing oversight of holdings.

Fourth, collective engagement and the management of systemic risk are becoming increasingly important. The UK Code incorporates market-wide and systemic risks into its principles, requiring investors to explain how they support well-functioning markets through policy participation, standard-setting and interaction with relevant stakeholders. Japan places particular emphasis on collective engagement as an important option and seeks to reduce legal uncertainty concerning joint holders and related regulatory issues.

Stewardship will therefore increasingly extend beyond individual companies to cross-company, cross-sector and market-level issues. These may include climate risk, capital efficiency, board quality, human rights in supply chains and the transparency of market information, all of which may require more coordinated investor action.

Fifth, accountability is continuing to expand across the investment chain. The revised UK Code establishes separate principles for proxy advisers, investment consultants and engagement service providers. The Japanese Code likewise requires proxy advisers, investment consultants and other service providers to manage conflicts of interest, maintain sufficient resources, disclose recommendation processes and, where necessary, engage directly with companies.

Stewardship frameworks therefore no longer examine only the conduct of asset managers. They also examine how asset owners establish mandate expectations, how asset managers conduct engagement and voting, how proxy advisers formulate recommendations, how investment consultants incorporate systemic risk, and how the entire investment chain discharges its responsibilities to ultimate beneficiaries.

Finally, stewardship is becoming more closely integrated with corporate-value enhancement, capital efficiency and broader corporate governance reform. Japan’s revisions clearly illustrate this direction, as they are closely connected with the outcomes of corporate governance reform, the 2024 Action Program, collective engagement and transparency regarding beneficial shareholdings. Although the United Kingdom adopts a more principles-based and market-oriented approach, its framework likewise encompasses matters such as capital structure, strategy and performance, directors’ responsibilities, remuneration, and environmental and social considerations.

Institutional investors will be better able to demonstrate the substantive contribution of stewardship to capital markets when they conduct specific engagement on matters such as improving shareholder returns, strengthening capital allocation, enhancing board oversight, increasing the quality of corporate disclosure and implementing sustainability strategies.

In conclusion, the international development of stewardship is not primarily about producing more reports or introducing more indicators. Rather, it represents a return to three fundamental questions: for whom stewardship is undertaken, why it is undertaken, and what changes it produces.

The latest revisions in the United Kingdom and Japan indicate that stewardship is moving from formal compliance focused on whether an activity has been undertaken to substantive assessment of whether that activity has been effective. It is also moving away from the accumulation of information intended merely to demonstrate completeness and towards more meaningful communication that enables beneficiaries, companies and the market to understand its actual value.

At a time when capital-market risks are becoming more complex, investment chains are growing longer and companies face increasing pressure to undertake sustainable transformation, stewardship is no longer simply a passive obligation. It is a critical lever for enhancing corporate value, strengthening investor confidence and improving market resilience.

[1]:UK FRC，FRC overhauls the Investor Stewardship Code to focus on value creation, reducing burdens and enhanced engagement between market participants

[2]:Japan FSA，Finalization of Japan’s Stewardship Code (Third revision) : Financial Services Agency

[3]:UK FRC，The UK Stewardship Code 2026

[4]:Japan FSA，Principles for Responsible Institutional Investors«Japan’s Stewardship Code»- To promote sustainable growth of companies through investment and dialogue -Publication of the final version and invitation to institutional investors to sign up for the Code

[5]:Japan FSA，Publication of the "Action Program for Corporate Governance Reform 2024: Principles into Practice"

[6]:Japan FSA，Revision of the Stewardship Code

[7]: Japan FSA，stewardship responsibilities refers to the responsibilities of institutional investors to enhance the medium- to long-term investment return for their clients and beneficiaries by improving and fostering the investee companies’ corporate value and sustainable growth through constructive engagement, or purposeful dialogue, based on in-depth knowledge of the companies and their business environment and consideration of sustainability consistent with their investment management strategies

[8]:Japan FSA，Laws, Regulations, and Q&As Regarding the “Act of Material Proposal” and “Joint Holders” Under the Large Shareholding Reporting Rule