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The Financial Conduct Authority (FCA) has published its consultation on the implementation of UK sustainability reporting standard (UK SRS) reporting, CP 26/5.
This follows the consultation which the government carried out last summer on the endorsement of the International Sustainability Standards Board's (ISSB) first two sustainability reporting standards (SRSs), to create the first two UK SRSs – UK SRS S1 and UK SRS S2 (see our blog post here for more details on the consultation and for background on the development of the ISSB's standards).
The government has not yet formally endorsed the ISSB's standards nor published the final versions of UK SRS S1 and UK SRS S2. However, the FCA had committed to publish its consultation on aligning its climate-related reporting requirements with the ISSB's standards in January 2026, to allow issuers plenty of time to understand its proposed direction of travel. The consultation is therefore based on the draft versions of the UK standards (published last summer).
The existing climate-related reporting regimes
A "comply or explain" disclosure regime in relation to the Taskforce on Climate-related Financial Disclosures (TCFD) Recommendations and Recommended Disclosures was first introduced into the Listing Rules with effect from financial years beginning on or after 1 January 2021. Since then, the ISSB has been established, and the global framework is moving away from the TCFD-aligned regime. Accordingly, the FCA is now consulting on replacing the TCFD-aligned requirements in the UKLRs with requirements based on the ISSB standards.
In addition, in-scope UK-incorporated companies are subject to separate requirements under the CA 2006 to include climate-related financial information in the non-financial and sustainability information statement which forms part of the strategic report in their annual report and accounts. These CA 2006 disclosures, which have been in force since accounting periods beginning on or after 6 April 2022, are broadly in line with those covered by the TCFD framework.
For more details on these two regimes and how they interact, see our Corporate Governance Fundamentals here.
The FCA's proposals
The key aspects of the FCA's approach are that the TCFD-aligned requirements will be deleted from the UKLRs and ESCC issuers will be required to:
- include instead mandatory disclosures in relation to UK SRS S2 (which relates to climate-related reporting), except that reporting on Scope 3 emissions data will remain on a "comply or explain" basis (in the light of the difficulty which some issuers have encountered when collating equivalent data for the purposes of the existing TCFD-aligned reporting requirements);
- apply UK SRS S1 as relevant when reporting on climate-related disclosures in UK SRS S2, but otherwise the requirements of UK SRS S1 in relation to sustainability-related risks and opportunities (which could reasonably be expected to affect an issuer's prospects) will apply on a "comply or explain" basis, though if no such risks or opportunities are identified, this must be disclosed;
- set out whether or not they have disclosed a transitional plan and if they have, where it can be found; and
- state in their annual report whether or not they have received third party assurance in relation to their UK SRS disclosures and include certain information where such assurance has been sought (though no reasons need to be disclosed for not obtaining assurance).
The FCA does not mandate where in the annual report the disclosures need to be made but issuers do need to specify where in the annual report they are located.
The consultation paper also sets out details on transitional arrangements and how the new regime is proposed to apply to other in-scope issuers, including international companies with a secondary listing (i.e. those within UKLR 14).
The consultation closes on 20 March 2026 and subject to the government finalising the UK SRSs, the FCA intends to publish its final rules in autumn 2026, with the new requirements then applying to financial years beginning on or after 1 January 2027.
For more details on the FCA's proposals, see our Corporate Governance Snapshot here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
