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| 5 minutes read

What does the UK Greening Finance Roadmap and new SDR disclosure regime mean for corporates?


On 18 October 2021, the UK government published its Greening Finance Roadmap setting out details of:

  • a new integrated regime for disclosure of climate and other sustainability issues for UK companies, the financial sector and creators of investment products, called the Sustainability Disclosure Requirements (SDR);
  • the UK Green Taxonomy; and
  • the government’s expectations for heightened investor engagement with investee companies on climate and other sustainability issues.

Key takeaways for corporates 

Companies will have to make sustainability disclosures which will involve reporting under forthcoming international standards and reporting environmental impact using the forthcoming UK Green Taxonomy (more on this below). This will be done within an integrated framework (the SDR) which should help to avoid confusion and the risk of greenwashing. The new disclosure regime builds on existing and forthcoming TCFD reporting requirements for UK premium listed companies ((see here), standard listed companies (see here), large private companies and LLPs (see here) and asset managers and owners (see here).

There will be new requirements for asset managers and owners to disclose how they take sustainability into account – which means corporates will need to provide relevant data and work out how to gather it (if they are not already considering this).

Companies will have to publish detailed and credible climate transition plans, although it is unclear from the Roadmap when this will become mandatory (more on this below.)

The government is calling for increased investor engagement with investee companies - in particular those in carbon-intensive sectors – which could impact voting practices, divestment decisions and access to capital.


According to the government: “Climate and environmental considerations should be central to the decision-making process of every UK board and every investor’s risk and return calculations.

The UK has one of the most ambitious climate targets to cut greenhouse gas emissions by 78% by 2035 (compared to 1990 levels) and reach net zero by 2050. World leaders are preparing to gather at COP26 in November for the big UN climate summit to discuss urgent action on climate change (see here).

The transition to a net zero economy cannot be achieved without a significant shift of investment to sustainable economic activities, projects and green technology. The UK’s strategy for greening the financial system involves three phases:

  • Phase 1 – informing investors and consumers (to address the information gap).
  • Phase 2 – acting on the information (so that sustainability information can be mainstreamed into business and financial decisions).
  • Phase 3 – shifting financial flows (so that these align with the UK’s net zero commitment).

The Roadmap focuses on Phase 1 – it is designed to ensure that “decision-useful” information on climate and environmental sustainability flows from corporates to financial market participants, in particular asset owners and asset managers. Better and more accurate data is also an important tool to combat allegations of “greenwashing” (see here and here).

This has significant impacts for corporates – not just in terms of which companies have to disclose and what they have to disclose but also in terms of how investors engage with investee companies on climate and other sustainability issues and access to capital.

SDR: which corporates, what will they need to disclose and when?

The SDR is the UK’s answer to the EU Sustainable Finance Disclosure Regulation (SFDR) but with significant modifications. 

The SDR will apply to the following types of companies:

  • UK-registered companies, including relevant financial services firms (banks and insurance companies); and
  • UK-listed companies.

The UK government is a big proponent of the global sustainability reporting standards that are going to be developed under the auspices of the International Financial Reporting Standards (IFRS) Foundation. The IFRS Foundation is in the process of establishing a new International Sustainability Standards Board (ISSB) this year, which will then develop an international climate disclosure standard (mostly based on the recommendations of the TCFD) in early 2022 and will then develop disclosure standards for other sustainability issues later on. Once those international standards have been developed, the UK government proposes to incorporate them into the SDR.

The SDR will be rolled out in stages but once fully in place it will require corporates to disclose the following:

  • Governance around sustainability risks, opportunities and impacts. This goes further than just climate change. Also, this involves not just how those issues impact a company but also how a company impacts those issues (the concept of “double materiality”).
  • Strategy for dealing with those risks, opportunities and impacts.
  • Processes to identify, assess and manage those risks, opportunities and impacts. So risk management is going to be key feature of SDR.
  • Metrics and targets to assess and manage those risks, opportunities and impacts - as well as performance against those targets and alignment with the UK Green Taxonomy.

See pages 18-19 of the Roadmap for details of what will be required by which type of UK companies by 2022, within 1-2 years and within 2-3 years.

The upshot is that by 2024/25 (at the latest) many UK companies (not just listed companies) will be subject to mandatory climate and sustainability disclosure requirements in their annual reports. That means disclosures in line with forthcoming ISSB climate/sustainability standards (but on the basis of double materiality) and disclosure on how aligned a company’s economic activities are with the forthcoming UK Green Taxonomy. For more information on the proposed UK Green Taxonomy, see here.

Transition plans will become mandatory 

The SDR will require “certain firms” to publish climate transition plans that align with the government’s net zero commitment or explain why they have not done so. So the requirement will be on a comply or explain basis. The Roadmap does not specify what is meant by “certain firms” but the government has said it will consult on the SDR framework for corporates by 2022 so this will no doubt be fleshed out then.

As yet, there is no commonly agreed standard or template for transition plans but the TCFD has recently published guidance on this (see here) and other organisations are also developing guidance including Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC).

The government has said that, as standards for transition plans emerge, it will look to incorporate them into UK regulation. So more on this to come in the near future. In the meantime, for our top tips on developing robust and credible transition plans, see here.

The government has said it expects to see the publication of climate transition plans become “the norm across the economy” - so although this is not yet a legal requirement, companies (and the financial sector) are being strongly encouraged to publish transition plans now.

Regulation of ESG data and ratings providers 

Any company that has had to engage with an ESG data or ratings provider will know how much influence their ESG scores can have on investors’ decisions and on inclusion/exclusion from certain key market indices. They will also know what a minefield it is trying to figure out how and on what basis those ESG scores have been compiled.

The government and the FCA are well aware of the pitfalls and have said in the Roadmap that they are considering having these firms regulated and authorised by the FCA. Further details are expected in 2022.

Next steps  

The government has said it will consult on the SDR framework for corporates by 2022.

Premium listed companies already have to disclose in line with the TCFD recommendations (see here) and the FCA consulted earlier this year on extension of those rules to standard listed companies (see here). The Roadmap makes it clear that, by 2022, standard listed companies will be required to disclose in line with the TCFD recommendations. And presumably once the ISSB climate standard has been developed and incorporated into the UK SDR regime, companies will have to report in line with the ISSB climate standard (and other ISSB sustainability standards once those have been developed), as well as reporting alignment with the UK Green Taxonomy. The timeline in the Roadmap envisages that happening in 1 to 3 years.

Considering how soon some of the SDR requirements are going to start applying, the government recommends that corporates (and others caught by the SDR) start taking steps now to build their disclosure capabilities and refine their data – if they haven’t already started.


cop26, non-financial corp reporting, climate change and environment, shareholder engagement, summer school 2022