In response to feedback, the FCA has moved to a comply-or-explain model for all of the sustainability disclosure obligations.
By Mark Austin CBE, Michael D. Green, Nicola Higgs, Betty M. Huber, Anne Mainwaring, James Bee, Toon Dictus, Charlotte Collins, and Johannes Poon
Key Points:
- Following consultation, the FCA has decided to apply all of the rules on a comply-or-explain basis (rather than mandating climate disclosures as originally proposed).
- It has also decided that international commercial companies with a secondary listing and depositary receipt issuers will be subject to the requirement to report against UK SRS on a comply-or-explain basis.
- The new rules come into force for accounting periods beginning on or after 1 January 2027, subject to certain optional transitional relief for non-climate and Scope 3 emissions disclosures.
On 30 September 2026, the FCA published its final rules (PS26/19) on UK Sustainability Reporting Standards (UK SRS)-aligned disclosures for listed companies, having consulted on the changes back in January 2026. UK SRS are the UK-endorsed version of the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards, and comprise General Requirements for Disclosure of Sustainability-Related Financial Information (UK SRS S1) and Climate-related Disclosures (UK SRS S2). UK SRS were made available for voluntary use in the UK at the end of February 2026.
These final rules form part of a broader push to enhance companies’ sustainability-related disclosures. The UK government recently consulted on proposals to overhaul the UK’s corporate reporting framework, with implications for non-financial and sustainability-related disclosures.
UK SRS Disclosure Requirements
The FCA had proposed that climate disclosures (UK SRS 2-aligned disclosures) would need to be made on a mandatory basis (excluding Scope 3 emissions disclosures), while non-climate sustainability disclosures (UK SRS S1-aligned disclosures) and Scope 3 disclosures would be made on a comply-or-explain basis. However, following consultation, it has revised this position so that all disclosures need only be made on a comply-or-explain basis.
The FCA reports that, while most respondents supported adopting UK SRS for listed issuers, some questioned the proportionality of mandating climate disclosures, citing concerns about international competitiveness. Respondents pointed out that the current Task Force on Climate-Related Financial Disclosures (TCFD)-aligned disclosure rules for listed companies operate on a comply-or-explain basis, but still generate high levels of disclosure. They also highlighted that mandatory reporting could be disproportionately burdensome for smaller companies whose business models are not materially impacted by climate or sustainability matters, while adding little value for investors. The FCA therefore considers that a comply-or-explain model strikes the correct balance. Although it did consider feedback suggesting it introduce a size threshold, the FCA concluded that this would over-complicate the rules (also noting that size is not necessarily the key determining factor as to whether climate disclosures provide decision-useful information to the market).
However, the FCA does highlight that issuers have other obligations to disclose the principal risks and uncertainties they face. Consequently, it explains that if climate or wider sustainability risks are among an issuer’s principal risks and uncertainties, they should consider how those risks are appropriately reflected in their reporting if they are choosing not to comply with UK SRS S1 and UK SRS S2.
The FCA has confirmed the requirement for these disclosures and/or explanations to be included in issuers’ annual reports. It has also confirmed that issuers may use cross-referencing where permitted under UK SRS S1 (and asset managers, life insurers, and FCA-regulated pension providers in scope of the UK Listing Rules sourcebook may cross-refer to their UK SRS S2 disclosures in their TCFD entity report). The FCA has made this explicit in the rules, in response to comments that there was uncertainty on this point.
Transition Planning and Assurance
The FCA has confirmed its proposed positions on transition plans and assurance. In relation to transition plans, it is introducing a transparency requirement for listed companies to disclose:
- if they have published a transition plan, and if so, where; or
- if they have not published a transition plan, and the reason why.
This is so as not to cut across government work that is considering how to implement transition plan requirements in the UK, which remains ongoing.
The FCA is also introducing rules which require listed companies that have received assurance over all or some of their disclosures or explanations to additionally disclose:
- 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; and
- where the assurance report can be located (if published) and how to access it (including a hyperlink if appropriate).
The FCA has clarified that companies will not need to publish private assurance reports. The regulator notes that it will keep the position on assurance under review, and could decide to mandate assurance in future when the market is sufficiently developed.
International Companies
The FCA has also amended its position in relation to international commercial companies with a secondary listing and depositary receipt issuers. Initially, it proposed that such companies would need to reference any reporting requirements and disclosures under their home jurisdiction requirements, including any voluntarily adopted standards or requirements. However, due to concerns that this could create an uneven playing field between UK and international companies, the FCA has changed the final rules to require these companies to report against UK SRS on a comply-or-explain basis. The regulator has confirmed its proposals to require these companies to also be subject to the rules on disclosures around assurance.
Implementation
The FCA has maintained the following, originally proposed implementation timings:
- Requirements will be effective for financial years starting on or after 1 January 2027 (so first reporting will take place in 2028)
- 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
The regulator has, however, removed the proposed rule that would have prevented early adopters from using the transitional reliefs, so these reliefs will be available to them for accounting periods beginning on or after 1 January 2027. Therefore, companies voluntarily making UK SRS disclosures before accounting periods beginning on or after 1 January 2027 can still benefit from the same phased implementation.
Preparing for the New Framework
Alongside the final rules, the FCA published supplementary materials on the new framework in Primary Market Bulletin 66. Most notably, the regulator is consulting on a new Technical Note on UK SRS disclosures. TN 803.1 provides guidance on matters including expectations on the level of detail to include when complying or explaining, how issuers can explain why they are not complying with the requirements, and other relevant disclosure obligations that issuers need to bear in mind. It also includes some illustrative examples of compliance statements and explanations.
Further, the FCA is consulting on amending TN 801.4 (“Disclosures in relation to sustainability matters, including climate change”) to reference the new framework. It is also proposing to delete TN 802.3 (“TCFD aligned climate-related disclosure requirements for listed companies”), which will become obsolete when the new framework takes effect. The FCA asks for feedback on these proposals by 28 October 2026 and aims to finalise these changes to the Knowledge Base by January 2027, when the new rules take effect.
In addition, Primary Market Bulletin 66 features a list of steps issuers can take now to prepare for the new rules, such as:
- familiarising themselves with the finalised rules and the proposed new Technical Note;
- identifying financially material sustainability and climate-related risks and opportunities;
- developing the data, metrics, and targets needed to support UK SRS disclosures; and
- engaging with investors to understand their disclosure expectations.
The FCA plans to provide further information to assist issuers with understanding the new requirements, starting with a webinar on 19 October 2026. It intends to publish additional information on its planned supervisory approach in the second half of 2027, before reporting begins in 2028.
