FCA consults on sustainability disclosures with UK SRS and UK Government publishes response on sustainability assurance regime proposals

What you need to know

• On 30 January 2026, the Financial Conduct Authority (FCA) published a consultation on aligning listed issuers’ sustainability disclosures with the UK Sustainability Reporting Standards (UK SRS), which it is anticipated will soon be endorsed by the UK Government.
• The FCA consultation proposes that making climate disclosures using UK SRS S2 will be mandatory for accounting periods beginning on or after 1 January 2027 although companies can continue to make Scope 3 emissions disclosures on a 'comply or explain' basis. Wider sustainability (non-climate) disclosures using UK SRS 1 can also be made on a 'comply or explain' basis. Transitional reliefs will apply to delay mandatory Scope 3 and non-climate disclosures by a year and two years respectively. 
• The FCA is not proposing to set Transition Plan (TP) requirements for listed companies beyond the requirements in S2. Nevertheless, the existing guidance on taking account of the TCFD Guidance will be replaced with a requirement to make a 'comply or explain' disclosure regarding the existence of a TP.
• In a related development, the UK Government has published a response to its June 2025 consultation on developing a sustainability assurance oversight regime. The response confirms that the government will introduce legislation to take forward its proposals when Parliamentary time allows and, meanwhile, has asked the Financial Reporting Council (FRC) to establish an interim voluntary register for sustainability assurance practitioners by mid-2026.

Overview of proposals for mandatory reporting requirements for listed issuers and a new sustainability assurance regime

On 30 January 2026, the FCA published a consultation on aligning listed issuers’ sustainability disclosures with the UK SRS, which it is anticipated will be endorsed by the UK Government imminently.

In a related development, the Government has published a response to its June 2025 consultation on developing a sustainability assurance regime for the UK.

Background

In June 2023, the International Sustainability Standards Board (ISSB) published two sustainability reporting standards (SRS): IFRS S1 on general requirements for disclosure of sustainability-related financial information and IFRS S2 on climate-related disclosures. IFRS S1 and S2 were intended to provide a single global baseline for sustainability disclosures upon which jurisdiction-specific requirements could be built (see ISSB publishes first standards on sustainability and climate disclosures and Disclosures required under the IFRS's Sustainability Disclosure Standards (ISSB S1 and S2)). Both S1 and S2 draw on the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.

Many companies are already reporting against IFRS S1 and S2 on a voluntary basis but, to become mandatory, the standards need to be formally adopted through national legislation. Since committing, in 2023, to adopt the ISSB's standards, the UK has been following a process to endorse IFRS S1 and S2 to create UK SRS. 

In June 2025, the government consulted on: (i) exposure drafts of the UK SRS S1 and S2; (ii) options to take forward climate-related TP requirements; and (iii) developing an oversight regime for the assurance of sustainability-related financial disclosures (see UK Government consults on adopting ISSB sustainability reporting standards and mandating Transition Plans to develop a sustainability reporting framework).

The Secretary of State's decision on endorsing the UK SRS has been delayed owing, in part, to discussions about the interaction of transitional reliefs in the UK SRS with the FCA rules and also as the Government was waiting for the ISSB to make the changes to S2 that it consulted on in June 2025 (see AGC Update – Issue 66 and the letter from the Government to the FCA dated 5 January 2026).

FCA consultation on aligning listed companies’ climate disclosures with UK SRS

The FCA's consultation, which is open for comment until 20 March 2026, proposes replacing the current rules for listed companies’ climate disclosures that are aligned with the TCFD recommendations, with rules to align reporting with the UK SRS. 

Appendix 1 to the consultation contains a draft instrument to introduce the changes and draft FCA Handbook text for the Glossary of Definitions, the ESG sourcebook and the UK Listing Rules (UKLR). The FCA's consultation is based on the exposure drafts contained in the Government's June 2025 consultation albeit that the FCA's final rules will reflect the final version of the UK SRS once endorsed. The FCA will consider the need for any changes to their proposals that result from the final version of the UK SRS when it considers feedback to the consultation.

Which disclosures will be mandatory? 

The FCA proposes that reporting against UK SRS S2 will be mandatory although it will not be mandatory to report Scope 3 emissions data (owing to the continuing difficulties regarding accurate data collection from value chain partners). In-scope companies can continue to make Scope 3 emissions disclosures on a 'comply or explain' basis. The FCA proposes that explanations where a company does not make Scope 3 disclosures would identify the specific paragraphs of UK SRS S2 where it has not produced Scope 3 disclosures as well as the reasons for not making the disclosures and the steps being taken or planned to be able to make the disclosures and the timeframe in which it is planned to do so.

Wider sustainability (non-climate) disclosures using UK SRS 1 can also be made on a 'comply or explain' basis but the requirements as regards any 'explanations' would not include information on all the UK SRS S1 reporting requirements that are not disclosed. This is due to the fact that sustainability related risks and opportunities will vary between industry and company. If an issuer has not identified any sustainability-related risks and opportunities that could reasonably be expected to affect its prospects, this must be disclosed.

The FCA had previously indicated that this consultation would include consideration of strengthening its expectations for listed companies’ TP disclosures by reference to the Transition Plan Taskforce (TPT) Disclosure Framework. However, the consultation states that as the Government is consulting on possible TP disclosure requirements, the FCA is not proposing to set TP requirements for listed companies beyond those in S2. The existing guidance in the UKLR, which references the TCFD guidance on TPs when making TCFD-aligned disclosures, will be replaced with a requirement to make a 'comply or explain' disclosure regarding the existence of a TP. New guidance will encourage the use of the IFRS June 2025 guidance on disclosing information about TPs in accordance with IFRS S2.

The FCA is proposing a flexible approach for in-scope international companies that have their primary listing in another jurisdiction. This would allow them to focus on meeting the sustainability-related reporting requirements and standards (including for TPs) that apply in their primary listing location or place of incorporation, or any standards or requirements that such issuers voluntarily apply.

Which companies are in-scope?

The table below sets out the application of the FCA's new sustainability disclosure rules (SDR):

The FCA does not propose to apply the new SDR rules to the following listing categories:

• Closed-ended investment funds (UKLR 11) and open-ended investment companies (UKLR 12).
• Shell companies (UKLR 13) as disclosure of sustainability-related risks or opportunities in line with the UK SRS is not anticipated to improve meaningfully the information for investors given such companies do not have substantial operations, mostly consist of cash or are short-dated securities or their purpose is to undertake an acquisition or merger.
• Issuers of debt and debt-like securities (UKLR 17), securitised derivatives (UKLR 18), and warrants, options and other miscellaneous securities (UKLR 19).

When will the new rules apply?

The FCA proposes that the new rules come into force from 1 January 2027 for accounting periods beginning on or after that date. 

Transitional reliefs in the UK SRS are available to defer certain aspects of reporting:

• Scope 3 emissions reporting will be deferred by a year such that in-scope companies would report on Scope 3 emissions on a 'comply or explain' basis for accounting periods beginning on or after 1 January 2028.
• Reporting of non-climate-related disclosures would be deferred by up to two years such that in-scope companies would report on wider sustainability disclosures on a 'comply or explain' basis for accounting periods beginning on or after 1 January 2029.

Reliefs also permit companies to use an alternative method for measuring greenhouse gas emissions for a year from initial application of the new rules if that method had been used immediately before the new rules become effective and in relation to the disclosure of comparative information.

The FCA is encouraging early adoption of the UK SRS by providing additional transitional reliefs for listed companies with an accounting period beginning before 1 January 2027.

Compliance statement

The consultation acknowledges that by opting to ‘explain’ rather than to ‘comply’ in relation to Scope 3 emissions and non-climate disclosures, an issuer may not be able to state compliance with the UK SRS as required under UK SRS S1. The FCA will provide further detail on the interaction of its proposed approach to statements of compliance provisions once the final UK SRS have been published.

Location of disclosures and digital reporting

The FCA proposes that climate-related information and non-climate disclosures may be included in the annual financial report in accordance with UK SRS S1 paragraph 60. No particular section of the annual financial report is specified. Cross references to climate-related and non-climate information in a separate report are acceptable provided they meet certain criteria in UK SRS S1 including as regards the nature and timing of publication of the information that is the subject of the cross reference.

The FCA is not proposing any requirements for issuers to digitally tag their sustainability disclosures. Any future proposals would dependant, in part, on the IFRS digital taxonomy being adapted to work effectively for the UK SRS.

No requirement to obtain assurance

The FCA does not propose to set mandatory assurance requirements given that the Government is considering the approach to the operation and oversight of the sustainability assurance market generally. The FCA may reconsider this issue in the future.

In-scope companies will be required to disclose whether they have obtained third-party assurance on their sustainability disclosures and information about that assurance but will not be required to give reasons if they chose not to obtain assurance.

Supervisory approach

The FCA's strategy as regards enforcement of the new rules will be set out in a future Primary Market Bulletin and, following the consultation, the FCA will also consider whether further guidance on its disclosure expectations is needed through updates to UKLR technical notes.

Consequential changes to requirements for asset managers, life insurers and pension providers

To avoid duplication of reporting, the FCA proposes to allow firms to cross refer to their UK SRS S2-related disclosures in their TCFD entity report, which is required under ESG 2 of the Handbook. This will require changes to the current provisions on cross refencing in ESG 2.2.6R. The version of the rules in force before 1 January 2027 will continue to apply until a firm produces disclosures (and, if applicable, explanations) in accordance with the new rules in force from 1 January 2027.

The consultation states that firms may also wish to use the flexibilities provided in ESG 5.6.5R and ESG 5.6.7R to cross refer to non-climate reporting in line with UK SRS S1.

Government consultation response on proposals for a UK sustainability assurance regime

The response confirms that the Government will take forward its proposals to develop a voluntary oversight regime for sustainability assurance practitioners. The regime will be operated by the FRC and relevant legislation will be brought forward when Parliamentary time allows. Meanwhile, the Government has asked the FRC to establish an interim register of sustainability assurance practitioners by mid-2026.

As a first step, the interim register will comprise a database of sustainability assurance practitioners and contain information about how they demonstrate adequate skills, knowledge and expertise for sustainability assurance engagements concerning multiple reporting standards, validated by the FRC. The regime will be profession agnostic, which means that practitioners from various professions, including financial auditors, sustainability experts, and Independent Assurance Services Provider (IASP), will be permitted to register as sustainability assurance practitioners. The FRC is asked to prioritise registration of firms themselves, while the registration of sole practitioners or individuals within firms will be a longer-term priority.

It is proposed that the interim register should be operational by mid-2026 to support appointments of sustainability assurance practitioners ahead of the proposed disclosures under the UKLR for the 1 January 2027 reporting year. The Government considers that the establishment of the register will also allow UK sustainability assurance practitioners to satisfy the subsidiary reporting exemption under EU Corporate Sustainability Reporting Directive (CSRD) that is available to EU subsidiaries of overseas parent companies where the group accounts are assured by a registered assurance practitioner in the parent company's jurisdiction of incorporation.

The FRC will provide further details on the development of the register and how assurance practitioners can play their part in due course. The Government expects relevant eligibility criteria to evolve over time as the market matures.

What happens next?

The Government is expected formally to endorse the UK SRS imminently (see the UK Sustainability Disclosure Technical Advisory Committee (TAC), December 2025 meeting minutes). The FCA will finalise its proposed SDR rules once that endorsement has taken place. The consultation states that the FCA is aiming to finalise the rules and publish its policy statement in autumn 2026.

It is anticipated that the Government will consult later in 2026 on mandating reporting using the UK SRS for other large entities not subject to the UKLR.

As noted above, the FRC will establish an interim sustainability assurance practitioner register by mid-2026.

Comment

The UK is one of over 40 jurisdictions that have either adopted or are planning to adopt the ISSB's SRS. The FCA's proposed changes to the UKLR are the first step in mandating use of the UK SRS. As was the case when TCFD reporting was introduced, a phased approach will be adopted, so that requirements will initially be placed on listed companies and then subsequently on large entities that are not subject to the UKLR.

The FCA is mindful of the debate on reporting burdens and the context of the EU reducing reporting requirements under its First Omnibus package. In providing several transitional reliefs and proposing that the current 'comply or explain' approach to climate-disclosures under the UKLR will apply for Scope 3 and wider sustainability disclosures, the FCA is attempting to provide a soft landing for the additional detail that disclosures under the UK SRS will require.  However, if the Government's approach to mandating use of the UK SRS by other UK entities does not also allow for explanations where disclosures are not met, this may perpetuate existing difficulties for organisations that are in-scope of the UKLR and the climate-related financial disclosures in the Companies Act 2006 and cannot both explain non-disclosure and meet mandatory requirements to disclose certain elements of the UK SRS.

What should companies do now?

Those in-scope of the new requirements should:

• Conduct a gap analysis between their existing sustainability reporting obligations and the new rules to understand the uplift in reporting that will be needed. 
• Map the data needed to make the additional disclosures under the UK SRS, identify the sources of that data and put in place a project plan to prepare for reporting in relation to FY 2027.

Want to know more? 

• UK Government consults on adopting ISSB sustainability reporting standards and mandating Transition Plans to develop a sustainability reporting framework
• Disclosures required under the IFRS's Sustainability Disclosure Standards (ISSB S1 and S2)
• ISSB publishes first standards on sustainability and climate disclosures
• Transition Plan Taskforce issues Disclosure Framework and consults on sector guidance
• Transition Plan Taskforce publishes final report on next steps for Transition Plans
• UK Government Consultation on Transition Plan Disclosures for Financial Services – What Does This Mean for Financial Services?