Video transcript: Final UK Sustainability Reporting Standards published

Transcript

Laura Gammon-D'Ippolito: In late January and February 2026, there were two significant updates as regards to sustainability reporting requirements in the UK. Firstly, on 30 January the FCA publishes Consultation paper 26/5, which would update sustainability disclosures for UK listed issuers. On 25 February the government published the final UK sustainability reporting standards, or UK SRS. Together these begin the shift away from TCFD aligned disclosure requirements in the UK to those aligned with the UK SRS.

UK SRS are the UK's endorsement of the ISSB standards. UK SRS S1 is a broader sustainability related financial disclosure standard, and UK SRS 2 is the climate specific disclosure standard. UK SRS closely resemble the underlying ISSB baseline, except for there are targeted amendments made to reflect the UK market. For example, the USSASB standards will be optional in the UK, whereas they are required in the baseline ISSB standards. It's also important to note that these standards sit alongside other important UK government initiatives, such as work around transition plan policy options, sustainability assurance oversight, as well as work to reform corporate reporting in the UK.

Exposure standards were consulted on last year. Here are some ways that the final standards differ from what we saw last summer.

Firstly, UK sustainability reporting standards have removed the language around the time periods for which companies can use reporting release around Scope 3 emissions reporting or wider sustainability reporting standards. This means that voluntary adopters will be able to use this release indefinitely and their use and bonds will be specified for mandated reporters within the legislation or regulation that requires them to use the SRS.

Secondly, UK SRS S2 now introduces a mechanism for financial institutions to explain why they've not been able to comply with the finance emission disclosure requirements, if that is the case. UK government also incorporated into UK SRS S2 the targeted amendments that the ISSB made to IFRS S2 last December. Now that the SRS have been published, they are available for voluntary use immediately. Further use is expected to be mandated for certain UK companies over time through legislation and regulation. For example, through the FCA's consultation.

The UK is proposing to replace its current TCFD aligned disclosure rules with those aligned to the UK SRS. It's proposing to keep broadly the same scope as those who are in scope of TCFD reporting right now, but it would introduce a differentiated approach depending on what type of issuer you are. For issuers of a primary UK listed issuer, the following would be required within your annual financial account. So, climate related disclosures aligned to UK SRSS 2 would be mandatory, except for Scope 3 emissions, which would be on a compliant explained basis. Wider sustainability related disclosures would also be on a compliant explained basis. Greater transparency would be required in terms of explanations around transition plans and whether any third-party assurance has been obtained over some or all of the sustainability disclosures that have been made in the annual financial report.

For secondary listed or depository receipt issuers, they would no longer be required to report against TCFD. They would also not be required to report against UK SRS. Instead, they would be required to set out what requirements they face in their overseas listing jurisdiction or place of incorporation, what standards they follow voluntarily, and where these disclosures can be found. This is with regards about sustainability and climate related disclosures as well as transition plan requirements. If they are not subject to any requirements and they don't voluntarily follow any standards or similar, then a statement to this effect would be required within their annual financial report.

The FCA's consultation closes on 20 March and final rules are expected this autumn. This would mean that the new rules would apply for accounting periods beginning on or after 1 January 2027 with the first climate related disclosures made in 2028 on 2027 data. Issuers would need to comply with all the requirements after 1 January 2027 unless they utilise the transitional release related to Scope 3 disclosures or wider sustainability disclosures. Now, the FCA's consultation expected based on the draft SRS, that this transitional release would be built into the UK SRS. As that is not the case, we'll need to see how they are reflected in the final rules. But as stated in the FCA's consultation, this would be one year for Scope 3 disclosures, and up to two years for water sustainability disclosures.

Additionally, we're expecting to see a consultation shortly from the government around its modernisation of corporate reporting. This programme of work will include a consultation about whether to require certain private companies to report against the UK SRS. The UK government is also expected to update its guidance on climate-related financial disclosures for private companies and LLPs. For more information, please get in touch.