UK SRS: FCA confirms comply or explain approach for listed company climate disclosures

The Financial Conduct Authority has now finalised its UK Sustainability Reporting Standards (UK SRS) for listed companies — the UK-endorsed version of the ISSB's sustainability and climate standards. The FCA has moved away from the originally proposed mandatory climate reporting model in favour of a ‘comply or explain’ approach, echoing the broader trend of simplification seen in the EU's Omnibus package on the CSRD.

This final position follows feedback received to the FCA’s consultation (CP26/5) from January, which originally proposed mandating UK SRS S2 (climate disclosures), with UK SRS S1 (non-climate sustainability reporting) and Scope 3 emissions reporting to be on a comply or explain basis (see our earlier blog post for details). Respondents raised concerns that mandating UK SRS S2 would be disproportionately burdensome for smaller companies given the costs and resources involved, and questioned whether it would support the international competitiveness of companies operating in the UK. 

How have the rules been simplified?

In its policy statement (PS26/19), the FCA has simplified the regime in two ways:

• The FCA will apply a comply or explain approach across all categories of disclosures, bringing UK SRS S2 into line with the approach consulted on for UK SRS S1 (non-climate disclosures) and Scope 3 (emissions data). 

• International commercial companies with a secondary listing and depositary receipt issuers will also report against UK SRS on a comply or explain basis, in place of the consultation proposal to signpost reporting under their home jurisdiction.

The FCA also reminds issuers of their existing obligation under DTR 4.1.8R to disclose principal risks and uncertainties facing the issuer. Where sustainability risks are among an issuer’s principal risks and uncertainties, issuers should consider how those are appropriately reflected in their reporting when choosing to ‘explain’ and not disclosing the information in line with UK SRS S1. In other words, 'explain' is not an off-switch: material sustainability risks that constitute principal risks must still be disclosed under DTR 4.1.8R.

Proposals confirmed as consulted

The FCA is proceeding with its proposals as consulted on in all other areas, most notably:

• excluding investment entities from scope and to continue applying disclosure requirements through its rules for asset managers in the ESG Sourcebook;

• maintaining the requirement for climate-related disclosures and/or explanations, including on Scope 3 emissions, to be included in companies’ annual reports;

• requiring UK SRS S1 disclosures to be located within the annual financial report, without specifying a section;

• not requiring listed companies to produce transition plans or introducing requirements for the location of transition plans;

• disclosing the sustainability assurance standards used, without requiring explanations where no assurance has been sought;

• requiring international companies to report against UK SRS on a comply or explain basis, aligning with the current approach to TCFD; and

• not requiring firms in scope of the ESG Sourcebook to apply UK SRS, although they may choose to cross-refer to their UK SRS disclosures made under the UKLR, where they are in scope of both regimes.

Comply or explain — then and now

The headline — a shift from 'mandatory' to comply or explain — understates what is changing. The TCFD-aligned regime in the UKLR is itself comply or explain; what is changing is the content and depth of what has to be complied with (or explained).

The key differences are significant:

• Scope — TCFD covers climate only (four pillars and 11 recommended disclosures); UK SRS covers both general sustainability (S1) and climate (S2), with the far more granular ISSB disclosure architecture, including Scope 3 emissions, scenario analysis and industry-specific metrics;

• Expectations on "explain" — the FCA's draft TN 803.1 signals that boilerplate explanations will not suffice: issuers should expect to identify which disclosures have been omitted, with proportionate disclosures as to why, and, where an issuer is taking steps, or plans to make disclosures in the future this should be set out in the explanation.

• Issuer scope — the comply or explain model now also captures international commercial companies with a secondary listing and depositary receipt issuers; and

• Transitional reliefs and assurance — UK SRS brings a 1-year relief for Scope 3 and a 2-year relief for wider UK SRS S1 disclosures, and introduces disclosure of the sustainability assurance standards used; TCFD had neither.

For issuers already reporting under TCFD, the practical work will be closing the gap between a TCFD-grade narrative and the disclosures required by UK SRS S1 and S2.

What’s next?

The rules will replace the FCA's existing TCFD-aligned climate disclosure regime for listed companies, which has been in place in the Listing Rules since 2020 and currently sits in the UKLR. The TCFD itself was wound up in October 2023, with its monitoring role transferred to the IFRS Foundation. As proposed, the new rules will start to apply to accounting periods starting on 1 January 2027, with first reporting in 2028. 

To support implementation and help reduce costs for companies, the FCA is providing a 1-year transitional relief for Scope 3 emission disclosures and a 2-year transitional relief for wider sustainability disclosures under UK SRS S1. 

To support users, the FCA has also published Primary Market Bulletin 66, which includes a consultation on a draft Technical Note TN 803.1, which will provide guidance on the level of detail to include when complying or explaining and examples, with feedback due by 28 October 2026. In addition, the FCA is hosting a webinar on 19 October 2026 to explain its updated sustainability disclosure requirements. 

FCA policy statement (PS26/19) is available here.

The FCA press release is available here.

For more information on the current TCFD based rules, see our Quick Guide: Key Sustainability Disclosure Regimes: UK climate disclosure rules under Listing Rules