The FCA has chosen pragmatism over prescription. Dropping mandatory climate reporting reflects the weight it now gives to proportionality and the UK's competitiveness as a listing venue, and in our view, it is the right call for now. Mandating full UK SRS S2 compliance would have imposed real costs on smaller issuers whose climate exposure is limited, and the FCA was right to resist a size-based threshold that would have added complexity without tracking actual risk.
The trade-off is that the regime will stand or fall on the quality of explanations. The FCA itself expects more than a third of domestic issuers to explain against most of UK SRS. Generic statements will do little for investors, while well-reasoned, company-specific explanations may prove almost as useful as the disclosures themselves.
From an investor perspective, however, reduced comparability remains a risk, and TN 803.1 and the FCA’s supervisory approach, due in the second half of 2027, will be important in shaping whether explanations prove genuinely useful. The FCA’s approach is also consistent with a wider move toward proportionate sustainability reporting on both sides of the Channel, seen in the UK government’s Modernising Corporate Reporting consultation and the EU’s Omnibus simplification package.
Overview
On September 30, 2026, the Financial Conduct Authority (FCA) published Policy Statement PS26/19, setting out final rules and its policy position following consultation in CP26/5 (January 2026). The made rules are contained in UK Listing Rules (Sustainability Reporting Standards Disclosure) Instrument 2026 (FCA 2026/56), coming into force on January 1, 2027.
The new framework requires in-scope listed issuers to make sustainability and climate-related disclosures in their annual financial reports by reference to UK Sustainability Reporting Standards (UK SRS): UK SRS S1 (general sustainability-related financial information) and UK SRS S2 (climate-related disclosures), published by the Department for Business and Trade in February 2026 as the UK-endorsed versions of the International Sustainability Standards Board (ISSB)’s IFRS S1 and IFRS S2.
Key changes from the consultation
Changes from CP26/5
- Comply or explain across all UK SRS. Under CP26/5, the FCA proposed a mixed regime:
- Climate disclosures under UK SRS S2 would have been mandatory, except for Scope 3 emissions.
- Scope 3 emissions and the wider sustainability disclosures under UK SRS S1 would have been on a comply or explain basis.
The final rules simplify this by applying a uniform comply or explain approach across all UK SRS requirements, including UK SRS S2 and Scope 3 emissions.
This change responded to feedback about the disproportionate burden mandatory climate disclosures could place on smaller listed companies, UK competitiveness concerns, and the complexity of a mixed regime.
- Secondary listing and depositary receipt issuers. CP26/5 proposed that UKLR 14 and UKLR 15 issuers should point to their home-country sustainability reporting. The final rules instead require these issuers to report against UK SRS on a comply or explain basis, driven by concerns about an uneven playing field and the risk of listing downgrades to avoid disclosure. Where home-country reporting already meets UK SRS, issuers can rely on it, but where it falls short, they must explain the gaps.
Transition from the TCFD regime
The new rules replace the TCFD-aligned disclosure framework which has been in place since 2020 (initially for premium-listed companies, extended to other listed issuers in 2021, and carried forward into the reformed UK Listing Rules in 2024). The related TCFD guidance is being deleted. UK SRS builds on and supersedes the TCFD's four-pillar framework by providing more granular, standards-based requirements focused on financially material information.
Who is in scope?
The rules apply to issuers in the following UK Listing Rules categories:
- UKLR 6—Equity Shares in Commercial Companies (ESCC)
- UKLR 14—International Commercial Companies Secondary Listing
- UKLR 15—Certificates Representing Certain Securities (depositary receipts)
- UKLR 16—Non-equity shares and non-voting equity shares
- UKLR 22—Equity Shares (Transition)
The rules do not apply to investment funds, shell companies or debt and other non-equity securities.
ESCC issuer obligations (UKLR 6)
Under the amendments to UKLR 6.6.6R (and UKLR 6.6.17R for overseas ESCC issuers) in FCA 2026/56, an ESCC issuer must include the following in its annual financial report:
- Climate disclosures (UK SRS S2). Either make disclosures in line with UK SRS S2 or provide a statement setting out a summary of the S2 requirements not met, the reasons, and any steps taken or planned to make those disclosures in the future.
- Wider sustainability disclosures (UK SRS S1). Where sustainability-related risks or opportunities have been identified (under paragraph 3 of UK SRS S1) but have not been disclosed in full, the issuer must describe the relevant risks or opportunities, the reasons for non-disclosure, and any steps planned. If no such risks or opportunities have been identified, a statement to that effect is required.
- Location. Statement of where disclosures appear, with cross-referencing permitted.
- Assurance. Whether third-party assurance has been obtained and, if so, the provider, scope, level, standards and location of any published report; no requirement to obtain assurance or explain its absence. The FCA is keeping mandatory assurance under review.
- Transition plan. Whether a climate-related transition plan has been published, where and how to access it, or why not.
FCA guidance reminds issuers that climate disclosures must also apply the relevant parts of UK SRS S1, even where an issuer is not otherwise reporting against S1. Issuers that publish a transition plan may also draw on the IFRS guidance on climate-related transition disclosures or the TPT Disclosure Framework, although neither is mandatory.
Secondary listing and depositary receipt issuer obligations (UKLR 14 / UKLR 15)
Under UKLR 14.3.24R, issuers with an international commercial companies secondary listing (and, by extension, depositary receipt issuers) must make the same UK SRS S2 and S1 comply or explain disclosures as ESCC issuers, together with a location and assurance statement. However, the transition plan disclosure requirement does not apply to UKLR 14 issuers. The FCA considered that transition planning requirements may be influenced by jurisdiction-specific factors and chose not to extend them to secondary-listed issuers at this stage.
Comparison of ESCC and secondary listing obligations
