FCA Consultation on Sustainability Disclosures for Listed Companies

On 30 January, the FCA issued CP26/5, proposing to replace its current Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosure framework with requirements aligned to the UK Sustainability Reporting Standards (UK SRS), which are derived from the International Sustainability Standards Board (ISSB) Standards published in 2023. This makes the UK one of 40 jurisdictions covering approximately 40% of global capital markets that are planning to adopt or use the ISSB Standards. It also reflects that the existing TCFD-based rules risk becoming obsolete now that the TCFD has been disbanded (and effectively superseded by ISSB).

Scope of Application

The proposed rules would apply to companies in the following listing categories: commercial companies (UKLR 6), secondary listing (UKLR 14), depositary receipts (UKLR 15), non-equity shares and non-voting equity shares (UKLR 16), and the transition category (UKLR 22). Certain categories are excluded from scope, including closed-ended investment funds, open-ended investment companies, shell companies, debt and debt-like securities, securitised derivatives, and warrants and options.

Key Proposals for Commercial Companies, Non-Equity Shares, and Transition Categories

Climate-related disclosures (UK SRS S2): The FCA proposes that climate-related disclosures under UK SRS S2 should apply on a mandatory basis, replacing the current "comply or explain" approach under TCFD. This reflects the progress made in climate reporting since the introduction of the FCA's TCFD-aligned rules.

Scope 3 emissions: A notable exception to mandatory climate reporting is Scope 3 emissions data, which would continue to apply on a "comply or explain" basis. The FCA acknowledges that Scope 3 reporting remains difficult for many companies because it involves collecting emissions data from third parties throughout the value chain. Companies choosing to "explain" would need to identify the specific UK SRS S2 paragraphs not complied with, explain the reasons, and outline steps being taken to make such disclosures in the future.

Wider sustainability disclosures (UK SRS S1): Recognising that wider (non-climate) sustainability reporting is new territory for many listed companies, the FCA proposes that UK SRS S1 requirements apply on a "comply or explain" basis. Where companies choose to "explain," they must identify the relevant sustainability-related risks or opportunities for which disclosures have not been made, provide reasons for non-disclosure, and describe any planned steps toward making future disclosures.

Transition plan disclosures: The FCA proposes that companies disclose whether they have published a climate-related transition plan and, if so, where it can be located. Companies without a published transition plan would be required to explain why not. The FCA is also introducing guidance recommending use of the IFRS Educational Material on transition plan disclosures.

Assurance transparency: While the FCA is not proposing mandatory assurance at this stage, companies would be required to disclose whether they have obtained third-party assurance on sustainability disclosures. Where assurance has been obtained, companies must disclose the assurance provider's name, which disclosures have been assured and to what level, the assurance standards used, and where the assurance report can be located.

Secondary Listing and Depositary Receipts Categories

For companies with listings in the secondary listing or depositary receipts categories, the FCA proposes a different approach that avoids duplication with requirements in their primary listing jurisdiction. Rather than requiring UK SRS disclosures, these companies would be required to disclose which climate and sustainability reporting requirements apply to them in their primary listing location or place of incorporation, or which standards they voluntarily adopt. They must also disclose whether they have obtained third-party sustainability assurance.

Implementation Timeline and Transitional Arrangements

The proposed rules would come into force from 1 January 2027, applying to accounting periods beginning on or after that date. Companies may take advantage of built-in UK SRS transitional reliefs: a one-year deferral for Scope 3 emissions disclosures (meaning mandatory application from accounting periods beginning on or after 1 January 2028), and up to a two-year deferral for non-climate UK SRS S1 disclosures (mandatory from accounting periods beginning on or after 1 January 2029). Companies using these reliefs must state in their annual financial report that they have not made the relevant disclosures.

Comparative information is not required for the first accounting period in which disclosures are made under the new rules, including following the expiry of transitional reliefs.

Practical Implications and Next Steps

In-scope firms should begin considering the gap between their current TCFD-aligned disclosures and the requirements of UK SRS S2 and S1.

The FCA is particularly seeking views on the proposed compliance basis for Scope 3 and UK SRS S1 reporting, the implementation timeline and transitional arrangements, and the approach to assurance. The consultation also seeks input on longer-term topics including digital tagging of sustainability information and the FCA's supervisory approach.

Responses to the consultation are due by 20 March 2026, and the FCA aims to publish final rules in autumn 2026. Given the implementation date of January 2027, firms should engage with the consultation process and begin preparations for the new regime.