FCA Changes Sustainability Reporting Rules for Listed Companies

The FCA has changed course on how UK Sustainability Reporting Standards will apply to listed issuers, replacing the proposed mandatory treatment of most climate disclosures with a comply-or-explain approach across UK SRS. The final rules also change the treatment of certain international issuers and set out the transition to the new regime.

The UK Financial Conduct Authority (FCA) has published Policy Statement PS26/19, finalising new sustainability disclosure rules for listed issuers within the scope of its existing TCFD regime. From accounting periods beginning on 1 January 2027, the current TCFD-aligned requirements will be replaced by reporting based on UK Sustainability Reporting Standards (UK SRS).

The final rules apply a “comply-or-explain” approach across UK SRS S1 and UK SRS S2. This differs from the FCA’s original proposal, which would have made most UK SRS S2 climate disclosures mandatory.

What Changed From the Original Proposal

In CP26/5, the FCA proposed making most UK SRS S2 climate disclosures mandatory. Scope 3 emissions would have remained subject to comply or explain, while wider sustainability disclosures under UK SRS S1 were also proposed on a comply-or-explain basis. Under this approach, issuers either provide the relevant UK SRS disclosure or give a proportionate explanation of their reasoning and judgement where financially material information is not disclosed in accordance with UK SRS.

In the consultation on CP26/5, more than 90% of respondents supported replacing the TCFD-aligned climate disclosure rules with UK SRS. Views were more divided on whether UK SRS S2 should be mandatory. Listed companies raised concerns about proportionality, particularly for smaller issuers, while many buy-side respondents and professional services firms supported mandatory climate disclosure.

The FCA also heard concerns that mandatory S2 reporting could be too burdensome for some smaller issuers and might not always produce useful information for investors. Respondents also said that combining mandatory requirements with comply or explain would make the regime harder to follow.

The FCA therefore dropped the proposed mandatory treatment of most S2 disclosures and aligned S2 with the comply-or-explain approach already proposed for S1.

The final rules also change the treatment of international commercial companies with a secondary UK listing and depositary receipt issuers. The consultation proposed that they would only signpost sustainability reporting under their home jurisdiction. Under the final rules, they will instead report against UK SRS on a comply-or-explain basis. Home-jurisdiction reporting may still be used where it meets UK SRS outcomes.

UK SRS Will Replace the Current TCFD Regime

UK SRS S1 and UK SRS S2 are the UK-endorsed versions of the International Sustainability Standards Board (ISSB) Standards. UK SRS S1 covers general sustainability-related financial disclosures, while UK SRS S2 addresses climate-related disclosures.

An explanation remains part of the reporting requirement. Where an issuer does not provide financially material information in accordance with UK SRS, the FCA expects a proportionate explanation of the issuer’s reasoning and judgement.

Timing and Transitional Reliefs

The new rules apply to accounting periods beginning on or after 1 January 2027, with first reporting under the regime expected in 2028.

The FCA has retained two main timebound transitional reliefs:

• Scope 3 disclosures: one-year relief;
• UK SRS S1 non-climate disclosures: two-year “climate-first” transitional relief.

Issuers must disclose that they are using the relevant relief, but they are not required to explain why.

The final UK SRS also retain relief from providing comparative information and, for one year, allow an alternative method for measuring greenhouse gas emissions where that method had been used immediately before initial application.

Disclosures and related explanations are made through the annual financial report, with cross-referencing permitted where allowed by UK SRS S1.

Transition Plans and Assurance

The final package also includes disclosure requirements relating to climate transition plans and sustainability assurance.

The FCA is not requiring listed companies to produce a transition plan. For the listing categories covered by these requirements, issuers must state whether they have published one and, if so, where it can be found. If no transition plan has been published, they must explain why.

The FCA is also not introducing mandatory sustainability assurance. Companies must disclose whether third-party assurance has been obtained. Where it has, they must report information including the assurance provider, scope, level, standards used and the location of the assurance report, if published.

What Reporting Teams Need to Prepare For

Reporting teams will need to determine where the company can report in accordance with UK SRS and where an explanation is required.

Where UK SRS S2 disclosures are not provided in full, the explanation must identify the requirements that have not been met, give the reasons and describe any steps planned to enable future disclosure. Similar requirements apply to UK SRS S1 disclosures.

Teams will also need to incorporate the new transition plan and assurance disclosures into the annual reporting process where applicable.

The FCA is consulting separately on proposed Technical Note (TN) 803.1, which provides further guidance on the level of detail expected when complying or explaining, examples of explanations and the interaction with the UK SRS statement of compliance. The consultation closes on 28 October 2026, and the FCA aims to finalise the guidance before the rules take effect.