UK sustainability reporting: Financial Conduct Authority (FCA) publishes proposals for new ISSB-aligned rules to replace TCFD-aligned rules for listed companies

Some mandatory disclosures proposed for in-scope companies

The FCA proposes that in-scope UK listed companies move to mandatory reporting against the UK Sustainability Reporting Standards (“UK SRS”) S2 (climate-related disclosures) – which many companies already do – but do not go as far as proposing mandatory disclosure of Scope 3 emissions data given feedback from issuers about the difficulties in collecting emissions data from third parties. Both Scope 3 emissions disclosure and UK SRS S1 would be on a ‘comply or explain’ basis.

The new rules are based on IFRS S1 and S2 to promote international consistency and alignment

The final UK SRS are expected to be published by the Department of Business and Trade (the “DBT”) in the early part of 2026 according to its recent letter to the FCA. Read more here about the content of the UK SRS. As such, the FCA has based the consultation on the draft UK SRS in order ensure that they have sufficient time to engage with UK issuers and market participants on their implementation approach. The FCA’s final rules will reflect the final version of the standards.

The UK SRS are broadly consistent with IFRS S1 and IFRS S2 which promotes consistency and efficiency for preparers and users. UK SRS S1 sets out general content requirements relating to sustainability-related disclosures where there is no specific standard. UK SRS S2 is currently the only topic-specific standard dealing with climate-related risks and opportunities. UK SRS S2 contains some additional detail in certain areas compared with the TCFD requirements, for example on Scope 3 emissions and information on transition plans.

The UK SRS incorporate the concept of single materiality (that is financial materiality). Interestingly, the recent Chinese endorsement of IFRS S1 and S2 included double materiality (that is a consideration of financial materiality and impact materiality), a concept also enshrined in the EU Corporate Sustainability Reporting Directive.

Which issuers would be in-scope for the proposed rules?

The FCA proposes to apply the new rules from 1 January 2027 to the commercial companies category, secondary listing category, depositary receipts category, non-equity shares and non-voting equity shares category and transition category (these would be “in-scope companies”).

The FCA does not propose to apply the rules to closed-ended investment funds category and open-ended investment companies (as the best way to introduce requirements to investment vehicles is through asset managers), shell companies category, debt and debt-like securities category, securitised derivatives category and warrants, options and other miscellaneous category (it is not proportionate to extend to these companies at this time).

Summary of the proposals

In summary, the FCA is proposing the following disclosures for in-scope companies for accounting periods beginning on or after 1 January 2027*:

Mandatory

• Climate disclosures under UK SRS S2 (except Scope 3)

“Comply or Explain”

• Scope 3 emissions disclosures under UK SRS S2
• Sustainability (non-climate disclosures) under UK SRS S1
• Disclosure of whether and where they have published transition plans or the reason why not
• Disclosure of whether they have obtained third party assurance on sustainability disclosures relating to UK SRS

The FCA is proposing some transitional reliefs under which in-scope companies would be exempt for reporting against UK SRS S2 in relation to Scope 3 emissions (one year deferral to 1 January 2028) and UK SRS S1 in relation to non-climate disclosures (up two year deferral to 1 January 2029).

We note that the FCA is seeking feedback on its approach to compliance with UK SRS S2. This is because certain aspects that underpin the reporting of climate information in UK SRS S2 are outlined in UK SRS S1. Therefore, the FCA is proposing to include a rule which requires companies, when reporting under UK SRS S2 (including disclosures relating to Scope 3 emissions), to apply the relevant sections of UK SRS S1 as relevant to such climate-related disclosures.

Consequently, any decision by an in scope company to ‘comply’ with Scope 3 emissions disclosure while choosing to ‘explain’ (i.e., not disclose) the related climate information required under UK SRS S1 must be approached with care. Such in-scope companies should be cautious to ensure that, where optional compliance routes are taken, they also provide all additional information required under UK SRS S1 to avoid gaps, inconsistencies or perceived omissions in their disclosures.

^{*As explained further below, there is additional flexibility for companies with their primary listing in a different jurisdiction.}

Transition Plans

The FCA states that mandating a requirement for transition plans is a matter for the government (in light of its recent consultation on climate-related transition plan requirements) but proposes that in-scope UK companies disclose whether and where they have published transition plans or the reason why not. The FCA proposes to amend the FCA Handbook to encourage companies to disclose material information about their transition plans in a consistent way which is accessible for users using the IFRS Educational materials (which were based on the Transition Plan Taskforce disclosure framework, see here for more information on this framework).

Assurance

The government published a consultation in June 2025 on an oversight regime for assurance of sustainability-related financial disclosures, therefore the FCA is not proposing to set any mandatory requirements for assurance of sustainability reporting at this time. However, the FCA acknowledges that investors want greater transparency on the scope and nature of assurance that is obtained for sustainability reporting. Therefore it proposes to require in-scope listed companies to disclose whether they have obtained third party assurance on sustainability disclosures relating to UK SRS.

The FCA states that this “would apply to [its] proposed rules relating both to disclosures against UK SRS S2 (including scope 3) and UK SRS S1. In the context of an ‘explain’ disclosure, any assurance undertaken in relation to that explanation would also need to be disclosed”. The FCA would not require listed companies to provide reasons for choosing not to obtain assurance.

Where third-party assurance has been obtained issuers would be required to state: (i) name of the provider; (ii) which disclosures or explanations have been assured and to what level (reasonable or limited); (iii) which standards were used; and (iv) where the assurance report can be located (if published) with a hyperlink (if appropriate).

Flexible approach for secondary listings

Recognising that non-UK companies may have their primary listing in another jurisdiction, the FCA is proposing that international issuers include a statement in their annual financial report setting out which climate and/or sustainability-related requirements and standards that issuer is subject to in the issuer’s primary listing location or place of incorporation (including in relation to transition plans) and/or standards that the issuer voluntarily follows. These issuers would also be required to disclose whether they have obtained third-party assurance on sustainability disclosures. Similar rules apply to depositary receipts issuers.

What about companies still reporting under TCFD as asset managers, life insurers and pension providers?

The FCA proposes that the FCA Handbook will be updated to allow asset managers, life insurers and pension providers disclosing under UK SRS S1 and S2 to cross-refer to those disclosures in their TCFD entity report insofar as those disclosures are relevant to their clients and customers.

Next steps

The FCA welcomes responses to the consultation by 20 March 2026. It aims to finalise the rules and publish the final policy statement in autumn 2026 and for the rules to come into force for reporting accounting periods beginning on or after 1 January 2027. In the proposal, companies would be expected to include the climate-related disclosures in the companies’ annual financial reports and cross-referencing in the circumstances set out in UK SRS S1 would be permitted.

In this context, the FCA’s consultation represents an important step in the UK’s transition toward a more consistent, internationally interoperable sustainability reporting framework. By aligning with the UK SRS and phasing out the standalone TCFD regime, the FCA is signalling a clear move toward consolidation, comparability and long term regulatory stability. Companies should therefore begin assessing the practical implications of the proposed changes - not only in terms of reporting processes and data readiness, but also in relation to governance structures, assurance expectations and cross functional coordination. As market practice evolves and regulators increasingly converge around global baseline standards, early preparation will be critical to ensuring a smooth transition and demonstrating credible progress on climate related disclosures.

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This note is intended to be a general guide to the latest ESG developments. It does not constitute legal advice.

Authored by Emily Julier and Rita Hunter.