ESG Quick Guide: UK climate disclosure rules under Companies Act 2006

At present, the UK has two main sets of rules for the disclosure of climate change issues by companies - one under regulations made in 2022 under the CA 2006 and one under the UK Listing Rules (“UKLR”). Companies which are incorporated and listed in the UK are required to comply with both sets of rules. 

In February 2026, the UK government formally endorsed the sustainability disclosure standards developed by the International Sustainability Standards Board ("ISSB") - IFRS S1 and S2 - for voluntary use in the UK, with some minor amendments. This was done via the UK Sustainability Reporting Standards ("UK SRS"). 

UK SRS S1 sets out the general requirements for sustainability-related disclosures. And UK SRS S2 sets out requirements for climate-related disclosures. The UK SRS therefore cover all aspects of sustainability – not just climate change. 

The UK SRS will require (when they become mandatory) new areas of disclosure and will require greater depth of reporting, which will involve additional costs for business.

The UK SRS will require changes to be made to the existing regimes under the CA 2006 and the UKLR. 

The Financial Conduct Authority ("FCA") is already consulting on changes to the UKLR to reflect the UK SRS and the government has said it will consult (on a date TBD) on changes to the CA 2006.

In the meantime, even if an entity did decide to voluntarily disclose against the UK SRS, the existing climate-related reporting regimes (under the CA 2006 and UKLR) continue to apply. 

The government has clarified (in its response to the consultation on the draft UK SRS) that public companies reporting in accordance with UK SRS S2 will meet their legal requirements to disclose climate-related financial information under the CA 2006. 

Mandatory 

• All UK incorporated companies that are required to produce a non-financial and sustainability information statement – i.e. UK companies that have more than 500 employees on average in a financial year and have either transferable securities admitted to trading on a UK regulated market or are banking companies or insurance companies.
• UK companies with securities admitted to AIM with more than 500 employees.
• UK high turnover companies (more than £500 million) with more than 500 employees.
• Traded or banking UK LLPs with more than 500 employees.
• Other high turnover UK LLPs (more than £500 million) with more than 500 employees.

UK subsidiaries that are in scope of the 2022 Regulations do not need to make individual disclosures where their UK parent company includes this information in their consolidated annual report. However, a UK company with an overseas parent company must make these disclosures if it is in scope.

Since 6 April 2022

The CFD regime is overseen by the Financial Reporting Council (“FRC”). 

Companies and LLPs in scope must include specified climate-related financial disclosures (“CFD”) in the non-financial and sustainability information statement in their annual reports. 

There are eight CFD requirements that fall under four thematic pillars: governance; risk management; strategy; and metrics and targets:

• A description of the governance arrangements of the company or LLP in relation to assessing and managing climate-related risks and opportunities.
• A description of how the company or LLP identifies, assesses and manages climate-related risks and opportunities.
• A description of how processes for identifying, assessing and managing climate-related risks are integrated into the overall risk management process in the company or LLP.
• A description of the principal climate-related risks and opportunities arising in connection with the operations of the company or LLP, and the time periods by reference to which those risks and opportunities are assessed.
• A description of the actual and potential impacts of the principal climate-related risks and opportunities on the business model and strategy of the company or LLP.
• An analysis of the resilience of the business model and strategy of the company or LLP, taking into consideration different climate-related scenarios.
• A description of the targets used by the company or LLP to manage climate-related risks and to realise climate-related opportunities and a description of performance against those targets.
• The key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities, and a description of the calculations on which those key performance indicators are based.

The purpose of the CFD requirements is to enable a reader to understand the effect of climate-related financial risks and opportunities on the in-scope company. It is expected that investors will use this information to make buying and selling decisions, and to inform their stewardship and broader stakeholder activities.

The CFD requirements are aligned with the recommendations issued by the Task Force on Climate-related Financial Disclosures (“TCFD”) - i.e. they are based on, but do not directly mirror, the TCFD recommendations and recommended disclosures. This is an important distinction (see “Interaction with UK Listing Rules” below).

It is a criminal offence for a director to fail to take all reasonable steps to prepare a strategic report. 

Separately, directors will commit an offence if they approve a strategic report that does not comply with the requirements of the CA 2006 and knew that it did not comply, or were reckless as to whether it complied, and failed to take reasonable steps to ensure compliance, or to prevent the report being approved. 

Both offences are punishable by a fine.

The FRC carried out a thematic review of the CFD regime by AIM and large private companies, which was published in January 2025.

The FRC looked at the annual accounts of 20 UK companies that had more than 500 employees and were either AIM companies or private companies with a turnover of more than £500 million. Companies were chosen from a variety of industries that will be affected by climate change in various ways and to different extents. It is the first time that the FRC had carried out a review of reporting by these companies.

Overall, the FRC review found that, while companies have endeavoured to meet the CFD requirements, there was inconsistent quality among the companies selected. The FRC emphasised that companies should be aiming to provide CFD information that is fair, balanced and comprehensive. However, it reminded companies that CFD information does not have to be long or complex, and commented that better disclosures are generally more concise and often convey information using tables or diagrams. The FRC review also set out examples of good practice and identified areas where companies can provide more consistent, coherent and concise disclosures, in addition to specific areas for improvement

For more information, see our blog post. 

The CFD regime in the CA 2006 and the CRFD rules in the UKLR are similar but not identical.

According to the government’s non-binding guidance on the CFD regime, UK companies with more than 500 employees that are within the scope of the CRFD rules under the UKLR will be subject to both the CFD (under the CA 2006) and the CRFD (under the UKLR). 

The guidance states that as both sets of requirements are based on the TCFD recommendations, there is a high degree of consistency between them. It points out that the main difference between the two regimes is that the UKLR directly reference the TCFD recommendations while the 2022 Regulations made under the CA 2006 are aligned with the TCFD recommendations but do not directly reference them.

The guidance also advises that where a UK listed company is subject to both regimes, disclosure in accordance with the CRFD is likely to involve the use of similar information to the disclosure required by the CFD and is therefore normally likely to meet the requirements of the 2022 Regulations.

However, despite the significant overlap, there are some key differences between the two regimes, in particular: 

• CRFD disclosures required by the UKLR are more detailed, are provided on a “comply or explain” basis and can be presented outside of the annual report.
• With CFD, all the required disclosures should be provided unless one of the available exemptions applies, and all the disclosures should be presented in the annual report.

The government has said it will consult (on a date TBD) on changes to the CA 2006 to make disclosure in line with the UK SRS mandatory for certain types of companies, including possibly private companies. 

The government has confirmed that its approach will be considered as a part of the broader reporting consultation - known as the Modernising Corporate Reporting ("MCR") programme - that it will be undertaking later in 2026.  

The FCA is already consulting on changes to the UKLR to make disclosures in line with the UK SRS mandatory for listed companies (see our blog post). That consultation closed on 20 March 2026. The FCA intends to finalise its rules in 2026, with a view to them applying to accounting periods beginning on or after 1 January 2027.

See Quick Guide on UK SRS.  

The government has made it clear that any decisions on the UK SRS need to be aligned with the government’s ambition to reduce the costs of regulation for business by 25%. The objective is to ensure that any new sustainability disclosure requirements generate decision-useful information for investors and other stakeholders, while not being overly burdensome for reporting entities to meet.

The Department for Business and Trade announced in October 20204 plans for an “ambitious” consultation in 2025 on further proposals to simplify and modernise the UK’s non-financial reporting framework, which is not limited to sustainability disclosures. Presumably this will be wrapped up as part of the government's MCR programme (discussed above). 

• Companies Act 2006 – Sections 414CA and 414CB
• Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31)
• Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/46)
• Government guidance (non legally binding)
• FRC review: Climate-related Financial Disclosures by AIM and Large Private Companies 

• UK: FRC review of climate-related financial disclosures by AIM and large private companies
• UK corporate reporting 2025/26: recent developments and guidance for listed companies
• UK corporate reporting 2025/26 – recent developments and guidance for large unlisted companies and LLPs
• UK: Government publishes final versions of UK SRS
• UK SRS: FCA proposes mandatory climate disclosures from 2027, except for Scope 3 emissions, for which it is "comply-or-explain" from 2028
• Quick Guide on CRFD regime under UK Listing Rules
• Quick Guide on UK SRS