FCA UK SRS Climate Rules: Proposed Scope, Reliefs and Reporting from 2027

Functional visual created for London Reporting Academy. The visual is educational and should be read with the article.

Every implementation document should label CP26/5 assumptions as proposed. A project plan may prepare for the likely direction without presenting the consultation as enacted law.

The FCA's current climate disclosure rules are aligned with the TCFD recommendations. TCFD was disbanded in 2023, while the ISSB standards have become the international baseline for investor-focused sustainability-related financial disclosure. The FCA proposes moving relevant listed issuers from the TCFD architecture to final UK SRS, preserving a climate-first approach and adding wider sustainability reporting on a comply-or-explain basis.

The proposed model aims to increase the quantity, quality and comparability of material information while recognising that Scope 3 and non-climate reporting capabilities are less mature.

CP26/5 uses listing category, not company size, as the main scope determinant.

An issuer should confirm its exact category and instrument structure. Group companies, overseas parents, regulated subsidiaries and asset-management activities may have other disclosure duties outside CP26/5.

Mandatory climate core

For UKLR 6, 16 and 22 issuers, the FCA proposes mandatory climate-related reporting in line with UK SRS S2, excluding Scope 3. It also proposes requiring the relevant sections of UK SRS S1 that underpin climate reporting.

CP26/5 identifies important S1 foundations that are not repeated in S2, including:

conceptual foundations and qualitative characteristics;

significant judgements, uncertainties and errors;

short-, medium- and long-term horizons;

metrics and target foundations;

location, timing, comparatives and other general requirements; and

defined terms and application guidance.

The practical message is that the mandatory climate core is not an S2-only checklist.

Scope 3 - comply or explain

The FCA proposes that Scope 3 requirements in UK SRS S2 apply on a comply-or-explain basis after the transition relief. An issuer choosing to explain would identify the specific S2 paragraphs not followed, explain why the disclosures were not made, and describe planned steps and the expected timeframe.

This approach recognises data challenges but does not treat Scope 3 as permanently optional. Investors should receive a precise gap explanation and a credible development plan.

The compliance-statement interaction remains important. CP26/5 states that an issuer choosing to explain may be unable to state compliance with UK SRS. The FCA said it would provide more detail after final UK SRS publication. Because the final Policy Statement is still pending, issuers should not assume that an explain will coexist with a full standard-level claim.

Wider non-climate sustainability - comply or explain

For the same core listing categories, the FCA proposes wider sustainability-related reporting under UK SRS S1 on a comply-or-explain basis. This is separate from the climate-related S1 requirements that support S2 and would be mandatory as part of the climate core.

An issuer that uses the UK SRS S1 climate-only relief cannot claim S1 compliance. The proposed FCA rules would also need to be read with the final UK SRS provisions allowing a regulator to determine the availability and duration of reliefs.

Transition-plan and assurance transparency

CP26/5 also proposes transparency about whether and where the issuer has published a transition plan, or why it has not, and whether it has obtained third-party assurance over sustainability disclosures. These are transparency proposals, not a general proposal in CP26/5 to require a transition plan or mandatory assurance engagement.

CP26/5 proposes that climate disclosures and any Scope 3 explanations be made in the annual financial report. It does not prescribe one specific section, allowing integration with other statutory and regulatory reporting.

Information could be incorporated by cross-reference in the circumstances set out in UK SRS S1 B45-B47. The issuer would identify where in the annual financial report the climate disclosures and Scope 3 explanations are located.

This means a later stand-alone sustainability report would not ordinarily solve an annual-report gap. Cross-referenced information must be available on the same terms and at the same time, be precisely identified, remain understandable and be subject to the same authorising responsibility.

The final UK SRS removes fixed time limits from the climate-only and Scope 3 reliefs for voluntary users, but permits mandating authorities to set limits and conditions. CP26/5 proposes using that authority.

The timeline depends on the beginning of the accounting period, not the calendar year in which the annual report is published.

Alternative GHG method

CP26/5 also recognises the UK SRS S2 C3 first-year relief, under which an entity may continue a GHG measurement method used in the immediately preceding annual period rather than move immediately to the GHG Protocol. This relief remains time-limited in the standard and should be supported by a transition plan, method disclosure and control record.

Identify the listing category. Is the issuer in UKLR 6, 16, 22, 14, 15 or another category?

Apply current rules first. Until final rules commence, continue the relevant TCFD-aligned statement and explanations.

Determine the proposed route. Core mandatory S2 route for UKLR 6/16/22; transparency route for UKLR 14/15; out-of-scope status for other listed categories under CP26/5.

Confirm the first accounting period. Use the accounting-period start date to determine proposed application and relief years.

Build the S2 plus S1 matrix. Include climate-specific requirements and all relevant S1 foundations.

Choose relief assumptions. Model Scope 3, non-climate S1, alternative GHG method and comparatives separately.

Design report location. Place climate disclosures in the annual financial report and test every cross-reference.

Analyse claims. Distinguish mandatory-rule compliance, standard-level compliance, Scope 3 explanation and S1 climate-only relief.

Retain change triggers. Update the plan when the FCA Policy Statement, final Handbook text or related government legislation is issued.

1. Build a proposal-to-control register

For each CP26/5 paragraph, record the proposed requirement, affected listing categories, proposed date, current rule, owner, implementation assumption and update trigger. This prevents consultation wording from leaking into current-year compliance statements.

2. Complete a dry S2 assessment

Test the latest annual report against final UK SRS S2 and climate-related S1 requirements. Do not wait for the FCA to finalise rules before discovering gaps in financial effects, Scope 3, scenario detail, industry metrics or same-time reporting.

3. Prepare two Scope 3 plans

Develop:

a compliance plan capable of producing material Scope 3 information; and

an explanation protocol identifying paragraph-level gaps, reasons, remediation steps, timing and governance if complete disclosure is not possible.

The existence of an explain route should not weaken the data programme.

4. Integrate finance and annual-report controls

Move climate reporting into the annual financial report timetable. Establish owners for current and anticipated financial effects, planning assumptions, financial-statement connections, late adjustments and board approval.

5. Document industry judgement

UK SRS makes the specific IFRS industry guidance optional, but S2 still requires industry-based metrics. Record industries, business models, guidance and alternative sources considered, metrics selected and reasons.

6. Draft multiple claim outcomes

Prepare controlled wording for:

full UK SRS S2 compliance;

S2 compliance using permitted reliefs;

mandatory FCA climate reporting with a Scope 3 explanation but no standard-level claim; and

selected voluntary disclosure before final rules.

Final wording should wait for the Policy Statement and the completed annual-report matrix.

A UKLR 6 issuer has a 30 September year end. Under the proposal, its first affected accounting period would begin on 1 October 2027, not 1 January 2027. The related annual report would likely be published in 2028.

The issuer expects to complete most S2 climate content but may need the Scope 3 relief. It should:

continue current TCFD-aligned reporting for the period beginning 1 October 2026;

use 2026-27 to close governance, scenario, financial-effects and metric gaps;

determine whether the proposed one-year Scope 3 relief applies to the period beginning 1 October 2027;

state use of the relief in the annual financial report if final rules retain the proposal;

plan for Scope 3 comply-or-explain from the next accounting period; and

monitor final FCA provisions on compliance statements, comparatives and early adoption.

The example shows why 'rules from 2027' is not the same as 'every 2027 annual report'.