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The FCA is seeking views on proposals to update its climate-related disclosure rules for listed issuers to align with the new UK SRS.

By Mark Austin CBE, Michael D. Green, Nicola Higgs, Betty M. Huber, Anne Mainwaring, James Bee, Toon Dictus, and Sara Sayma

Key Points:

  • On 30 January 2026, the FCA published its Consultation Paper on the switch from TCFD-aligned disclosure rules for listed companies to UK SRS-aligned disclosure rules (CP26/5).
  • As the final UK SRS have not yet been published, these proposals are based on the draft UK SRS.
  • The FCA proposes that most of the requirements will come into force from 1 January 2027, for financial years starting on or after 1 January 2027.

Summary of the FCA’s Proposals

Under UKLR 6, UKLR 16, and UKLR 22 (Commercial Companies, Non-Equity Shares and Non-Voting Equity Shares, and Transition Categories)

  • Mandatory climate (UK SRS 2-aligned) disclosures, excluding Scope 3
  • Comply-or-explain Scope 3 disclosures
  • Comply-or-explain sustainability non-climate (UK SRS S1) disclosures
  • Transparency around transition plans and assurance
  • The approach to statements of compliance to be confirmed
  • Timing:
    • Requirements in force from 1 January 2027, for financial years starting on or after 1 January 2027
    • One-year transitional relief for comply-or-explain Scope 3 requirements, expiring for financial years beginning from 1 January 2028 and onwards
    • Two-year transitional relief for comply-or-explain UK SRS S1 requirements, expiring for financial years beginning from 1 January 2029 and onwards

Under UKLR 14 and UKLR 15 (Secondary Listing and Depositary Receipts Categories)

  • Transparency around climate and sustainability reporting requirements applicable to companies in their primary listing location or place of incorporation, or any requirements or standards voluntarily applied (including in relation to transition plans)
  • Transparency around any assurance undertaken in relation to these disclosures
  • Timing:
    • Requirements in force from 1 January 2027, for financial years starting on or after 1 January 2027

Background — UK SRS

The publication of CP26/5 has come before the Department of Business and Trade (DBT) has published the final UK Sustainability Reporting Standards (UK SRS). DBT, as part of a public consultation, published exposure drafts of UK SRS S1 General requirements for disclosure of sustainability-related financial information (UK SRS S1) and UK SRS S2 climate-related disclosures (UK SRS S2) on 25 June 2025 (for more detail on the consultation, please see this Latham blog post). UK SRS S1 and UK SRS S2 are directly based on the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards, with amendments for UK application. DBT’s consultation on UK SRS S1 and S2 closed on 17 September 2025 and we are now awaiting the final versions of UK SRS S1 and S2 as part of the UK government’s process to endorse the ISSB standards.

The Task Force on Climate-Related Financial Disclosures (TCFD) was established in 2015 by the Financial Standards Board (FSB) and aimed to create a global baseline for climate-related reporting focused on four pillars: governance, strategy, risk management, and metrics and targets. TCFD was disbanded in October 2023, following the announcement by the FSB that TCFD had fulfilled its remit to make climate risk a standard part of corporate reporting. ISSB built on the recommendations of TCFD, publishing IFRS S1 and S2 in July 2023. IFRS S2 builds on and largely tracks TCFD recommendations, whereas IFRS S1 goes further, focusing on wider sustainability-related risks and opportunities. As of November 2025, around 40 jurisdictions are so far introducing ISSB standards into their legal and regulatory frameworks on either a mandatory or voluntary basis, including Australia and Hong Kong.

On 5 January 2026, DBT published a letter sent to the FCA providing an update on the government process to finalise UK SRS S1 and S2. The letter noted that, after receiving consultation feedback, DBT would be removing time-specific references about the application of transitional reliefs contained in UK SRS S1 and UK SRS S2. The letter noted that the application and availability of these reliefs would be left to government regulations, FCA rules, or rules made by any other relevant authorities. This was in response to stakeholder feedback, which strongly advocated for allowing entities sufficient time to align with the most challenging parts of the standards. DBT also noted that it would clarify in the final UK SRS S1 how statements of compliance would apply to reporters that make use of these reliefs. DBT anticipates publishing the final standards in early 2026. This plan is consistent with the minutes of the December TAC meeting, which state that the final UK SRS are expected to be published in February.

DBT also noted in its letter that the final UK SRS S2 would incorporate ISSB’s amends to IFRS S2. ISSB’s amendments to IFRS S2 were published on 11 December 2025 and aimed to simplify and add flexibility to the standards on greenhouse gas emissions disclosures and measurement.

Background — UK Sustainability-Aligned Reporting Rules for Listed Companies

In 2020, the FCA introduced climate-related disclosure rules for premium listed companies, requiring these companies to explain if they had made TCFD-aligned disclosures or to explain why not. In 2021, these rules were extended to cover issuers of standard listed equity shares and depositary receipts representing equity shares. In 2024, following the FCA’s work to streamline its listing regime, the climate disclosure rules were carried over to apply to five listing categories:

  • Equity shares (commercial companies) under UKLR 6
  • Equity shares (transition) under UKLR 22
  • Non-equity and non-voting equity shares under UKLR 16
  • Equity shares (international commercial companies secondary listing) under UKLR 14
  • Certificates representing certain securities (depositary receipts) under UKLR 15

In alignment with the disbanding of TCFD and the UK government’s process to endorse the ISSB standards, CP26/5 is consulting on the FCA’s proposals to replace its TCFD “comply or explain” reporting requirements for listed companies with UK SRS S1 and S2-aligned reporting requirements.

As the final UK SRS have not yet been published, the proposals in CP26/5 are based on the draft UK SRS, and so it remains to be seen whether there will be any updates to the FCA’s proposed rules to reflect the final UK SRS S1 and S2.

The FCA’s Current Proposals

Scope

The scope of the proposed rules aligns with the current rules for TCFD-aligned disclosures, and the FCA has opted not to extend the proposals to other categories of companies under the UKLR (such as the UKLR 11 closed-ended investment funds category or the UKLR 13 shell companies category).

However, unlike the TCFD-aligned disclosure requirements, companies in the secondary listing (UKLR 14) and depositary receipt (UKLR 15) categories will be subject to a different set of rules, which focus on transparency rather than UK SRS-alignment (see below).

Compliance Basis

With the exception of Scope 3 emissions reporting, the FCA has opted to move to mandatory reporting in annual financial reports for climate-related risks and opportunities (UK SRS S2-aligned reporting). The FCA explains that this decision was based on the consistent improvement in public company alignment with TCFD recommendations since the TCFD-aligned comply-or-explain requirements were first introduced in January 2021.

For disclosures relating to Scope 3 emissions, the FCA is proposing to introduce these on a comply-or-explain basis in annual financial reports, after a period of one year transitional relief. Scope 3 disclosures already form part of the FCA’s TCFD-aligned climate rules and the FCA received pre-consultation feedback that listed companies continue to face challenges in collecting the data needed from third parties in the value chain. Taking into account these challenges, the FCA is proposing that the UK SRS S2 standards relating to Scope 3 emissions should instead be implemented on a comply-or-explain basis, with similar “explain” requirements to those under the current TCFD-aligned rules, namely to:

  1. identify the specific paragraphs of UK SRS 2 where a listed company has not produced Scope 3 disclosures;
  2. explain the reasons for not making such disclosures; and
  3. explain any steps being taken or planned to be taken in order to make the disclosures in the future, and the timeframe for making such disclosures.

For disclosures on wider sustainability (non-climate) related risks and opportunities (under UK SRS S1), the FCA is also proposing to introduce requirements on a comply-or-explain basis, rather than a mandatory basis. These requirements would kick in after a period of two years transitional relief, therefore applying for financial years beginning from 1 January 2029. The FCA recognises that, whilst it has had rules on climate reporting in place since 2021, it has not previously introduced wider sustainability reporting for listed companies; therefore, some listed companies may not yet have developed the processes for reporting this information. In alignment with the materiality threshold in UK SRS S1, if a listed company opts not to make disclosures or to make partial disclosures, it is only required to meet the more detailed “explain” requirements where the listed company has identified sustainability-related risks or opportunities that could reasonably be expected to affect its prospects. Where this is the case, the listed company must explain:

  1. the relevant sustainability risks or opportunities for which disclosures have not been made;
  2. the reasons for not including these disclosures; and
  3. any steps being taken or planned to be taken to make those disclosures in the future, including the timeframe for doing so.

Listed companies would be required to specify where in their annual financial report climate-related disclosures and any Scope 3-related explanations are located, but issuers may decide in which section of the annual financial report these disclosures should be included. If a listed company has not identified any sustainability-related risks and opportunities that could reasonably be expected to affect its prospects, it merely needs to disclose that fact.

The only exception to the UK SRS S1 comply-or-explain approach is in relation to those elements of UK SRS S1 that would also underpin the mandatory UK SRS S2 disclosures, including areas covering conceptual foundations, judgements, uncertainties and errors, defined terms, and application guidance, amongst others. This is in line with the approach taken to the climate-first transitional relief in IFRS S1.

This approach appears to align with the intentions set out in the 5 January 2026 DBT letter, in which DBT noted it would be removing the time-barred elements of its UK SRS transitional reliefs and that the application and availability of these reliefs would be a matter for the Companies Act, FCA rules, or other regulatory authorities. The UK SRS S1 and Scope 3 emissions transitional reliefs (currently set out in paragraph E4 of the draft UK SRS S1 and paragraph C4(b) of the draft UK SRS S2, respectively), are both currently time-barred, expiring after two years and one year, respectively. If DBT intends to remove the time-barred elements of these reliefs, then the FCA appears to be following the thread of making these disclosures optional, with the additional overlay of an “explain” requirement. The approach for private companies remains to be seen, as the UK government has not yet published its proposals for UK SRS reporting under the Companies Act.

Transition Plan Disclosures

The FCA is not currently proposing to introduce mandatory transition plan disclosures, and instead has included a transparency requirement for listed companies to disclose:

  1. if they have published a transition plan, and if so, where; or
  2. if they have not published a transition plan, and if not, the reason why.

The FCA will delete the current Handbook Guidance which states that listed companies should take into account Section C of the TCFD Annex “Guidance for All Sectors”. This makes recommendations on transition plan disclosures, but does not set out what should be covered in a transition plan. Instead, the FCA is proposing to introduce Handbook Guidance stating that listed companies which produce a climate-related transition plan may wish to use the IFRS Educational Material.

The FCA has referenced the June to September 2025 Department for Energy Security and Net Zero (DESNZ) climate-related transition plan consultation, which included proposals for possible disclosure requirements and implementation routes (see this Latham blog post). Given the ongoing work by DESNZ, the FCA did not consider it appropriate to go further than the above approach at this point in time.

Assurance

Similarly, for assurance, the FCA proposes to only introduce a transparency requirement at this point in time, rather than a positive assurance obligation. Here, the FCA also acknowledges ongoing work by the government, specifically the June 2025 government consultation on the oversight regime for assurance of sustainability-related disclosures (see this Latham blog post). In light of the ongoing work, the FCA is currently proposing rules which require listed companies that have received assurance over their disclosures or explanations (against UK SRS S2 (including Scope 3) and UK SRS S1) to additionally disclose:

  1. the name of the assurance provider;
  2. which information or disclosure has been assured and to what level (e.g., reasonable or limited assurance);
  3. which assurance standards were used; and
  4. where the assurance report can be located (if published) and how to access it (including a hyperlink if appropriate).

Secondary Listing and Depositary Receipt Categories

The TCFD-aligned comply-or-explain reporting requirements currently also apply to companies in the secondary listing (UKLR 14) and depositary receipt (UKLR 15) categories. Given the wide-spread adoption of the ISSB standards across the globe, the FCA is looking to avoid duplication or friction arising from its proposals for companies in the UKLR 14 and 15 categories (which capture companies based overseas) and accordingly is not looking to take the approach described above for such companies.

Instead, the FCA is proposing to remove the TCFD-aligned comply-or-explain reporting requirements for these companies and replace this with transparency requirements to state the following in their annual financial report:

  1. Any climate and/or sustainability disclosure requirements (including relating to transition plans) which the issuer is subject to in relation to equity shares in their primary overseas listing location or their place of incorporation. This includes any requirements the issuer would be subject to absent any relief or exemption (the relief or exemption must then be explained).
  2. Any climate and/or sustainability-related disclosures (including in relation to transition plans) voluntarily adopted by the issuer.
  3. If applicable, the fact that the issuer is not subject to any such requirements or does not otherwise voluntarily follow any such standards or requirements.
  4. If disclosures are made, where these can be found.
  5. If assurance over disclosures or information has been obtained:
    • The name of the assurance provider
    • Which information or disclosure has been assured and to what level (e.g., reasonable or limited assurance)
    • Which assurance standards were used
    • Where the assurance report can be located (if published) and how to access it (including a hyperlink if appropriate)

Compliance Statements

Paragraph 72 of UK SRS S1 contains a requirement for companies that comply with all elements of UK SRS to make “an explicit and unreserved statement of compliance”. The FCA has asked for views on the approach to this requirement where firms opt to “explain” rather than comply from a Scope 3 or UK SRS S1 perspective, noting that the FCA considers that meeting the “explain” requirements would make it clear which elements of UK SRS are not being complied with.

Next Steps

Comments are requested by 20 March 2026. The FCA rules are based on the exposure drafts of UK SRS S1 and UK SRS S2 and therefore cannot be finalised until DBT publishes the final UK SRS S1 and S2. DBT has given an indicative date of early 2026 for publishing the final standards. In scope companies may begin to consider the interoperability of the FCA rules with global standards and other jurisdiction-specific timelines to avoid duplication of efforts. 

If the FCA is targeting 1 January 2027 for implementation, it will need to move quickly to publish its Policy Statement and final rules following the end of its seven-week consultation and the publication of the final UK SRS S1 and UK SRS S2. It states that it is aiming to publish its Policy Statement in autumn 2026, leaving issuers with only a short period to implement the final rules. The FCA plans to set out its approach to monitoring and enforcing compliance with the new rules by listed companies in a future Primary Market Bulletin.