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:

• the rules under the CA 2006 (known as the CFD regime); and
• the rules under the UK Listing Rules (“UKLR”) (known as the CRFD regime).

The CFD regime/CA 2006 are administered by central government and the Financial Reporting Council ("FRC"). 

The CRFD regime/UKLR are administered by the Financial Conduct Authority ("FCA"). 

In February 2026, the UK government formally endorsed the global sustainability disclosure standards developed by the 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"). See our Quick Guide on the UK SRS.

UK SRS S1 sets out the general requirements for sustainability-related disclosures. 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 changes to be made to the existing regimes under the CA 2006 and UKLR:

• The UK government said, in its Modernising Corporate Reporting consultation in September 2026, that it is reviewing what changes would need to be made to the CFD regime in the CA 2006 to reflect the UK SRS. That review is expected to conclude by spring 2027 and feedback from that review, and from the Modernising Corporate Reporting consultation, will inform future statutory changes (see our blog post). This is discussed in more detail below. 
• The FCA announced in September 2026 that it will replace the existing CRFD regime under the UKLR with new “comply or explain” rules relating to the UK SRS starting in January 2027 (see our blog post and ESG Quick Guide: UK climate disclosure rules under Listing Rules).

The government has indicated that companies reporting voluntarily in accordance with the UK SRS S2 - and UK listed companies reporting under the revised UKLR - will meet their climate disclosure requirements under the CA 2006 (see para 158 in the government's Modernising Corporate Reporting consultation document and para 1.91 in the government's Response to its Consultation on the UK SRS).

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 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 climate disclosure rules in the 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.

In January 2025, the FRC published a thematic review of the CFD regime by AIM and large private companies. 

• 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 was 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. 

In September 2026, the FRC published its Annual Review of Corporate Reporting 2025/26, setting out findings from its monitoring of UK corporate reporting during the year ended 31 March 2026 (see FRC press release): 

• The FRC noted that companies are becoming accustomed to the CFD reporting framework, for which many companies are in their second year of reporting. 
• The review found that the quality of corporate reporting by FTSE 350 companies has been maintained, while the gap in quality between larger listed companies and other companies is narrowing. 
• The proportion of FRC reviews leading to substantive enquiry letters also fell for the second consecutive year, reflecting a positive trend in reporting quality across the FRC’s risk-based sample.
• The FRC made a number of observations in relation to the metrics and targets pillar, including (in respect of CFD reporting) a lack of clarity over which emissions were covered by targets, and limited descriptions of the climate-related key performance indicators, including the basis for calculation, and (in respect of TCFD disclosures) insufficient explanation of performance against targets and the basis for not disclosing material Scope 3 emissions.

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.

In September 2026, the Department for Business, Innovation, Science and Trade (BIST) published a consultation on Modernising Corporate Reporting. 

This “once-in-a generation review” aims to produce a more coherent, proportionate and future-fit set of rules. The new regime would be principles-based with a focus on providing information that is financially material and decision-useful for investors and creditors.

The consultation closes on 30 November 2026 and the government intends to publish a consultation outcome by the end of May 2027.

The consultation does not propose any changes to the climate disclosure rules in the CA 2006 / CFD regime at this stage. The government is still assessing how the CFD regime is being used by companies, investors and other users. That CFD review is expected to conclude by spring 2027 and feedback from that review, and from the Modernising Corporate Reporting consultation, will inform future statutory changes, including how the UK SRS should be reflected in the CA 2006. 

The consultation also seeks views from investors and creditors on the usefulness of CFD disclosures and from private companies on the benefits of making them, for example to attract capital or to develop a climate strategy.

The consultation emphasises that all sustainability-related disclosures should be strategic and financially material but suggests that companies should be able to choose whether to integrate this information within the strategic report or present it in a separate sustainability section.

However, the consultation does include proposed changes to the disclosure requirements relating to the environment, employees, human rights, anti-corruption and anti-bribery in the CA 2006 (also known as “NFSIS” non-climate reporting requirements).

For more information, see our blog post: UK: Government consults on modernising corporate reporting: sustainability takeaways.

• 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: Climate-related Financial Disclosures by AIM and Large Private Companies 
• FRC: Annual Review of Corporate Reporting 2025/26
• Modernising corporate reporting consultation

• UK: Government consults on modernising corporate reporting: sustainability takeaways
• UK SRS: FCA confirms comply or explain approach for listed company climate disclosures
• UK: Government publishes final versions of UK SRS
• 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
• ESG Quick Guide: UK climate disclosure rules under Listing Rules
• ESG Quick Guide: UK Sustainability Reporting Standards (UK SRS)
• Other ESG Quick Guides