UK FCA Shifts to Comply-or-Explain for Climate Reporting: What Listed Companies Need to Know (2026)

Table of Contents

Mandatory Climate Reporting Abandoned Scope Expansion Key Elements of the Final Rules Regulatory Trends and Future Considerations Impact on Affected Companies

The UK Financial Conduct Authority (FCA) has published Policy Statement PS26/19, finalising its rules on sustainability disclosures for listed companies. The FCA had previously consulted on proposals to replace the existing TCFD-aligned disclosure regime with new requirements based on the UK Sustainability Reporting Standards (UK SRS). However, the final rules differ significantly from the consultation proposals.

Mandatory Climate Reporting Abandoned

The most notable change is the FCA's decision to abandon its proposal for mandatory reporting against UK SRS S2 (climate-related disclosures). Instead, all UK SRS disclosures, including climate disclosures, Scope 3 emissions, and non-climate sustainability disclosures under UK SRS S1, will apply on a "comply-or-explain" basis. This simplification was introduced due to feedback from respondents who expressed concerns about the disproportionate burden on smaller listed companies and the potential impact on the UK's international competitiveness.

Scope Expansion

The FCA has also extended the comply-or-explain UK SRS requirements to international commercial companies with a secondary listing and depositary receipt issuers. Under the consultation proposals, these companies would have only been required to signpost any sustainability reporting requirements applicable in their home jurisdiction. This change addresses the feedback regarding an uneven playing field and reduced data comparability for investors.

Key Elements of the Final Rules

- Climate Transition Plans: Listed companies must disclose whether they have published a climate-related transition plan and, if not, provide an explanation. - Third-Party Sustainability Assurance: Companies must state whether they have obtained third-party sustainability assurance over their UK SRS disclosures. - Implementation Timeline: The rules will apply to accounting periods starting on or after January 1, 2027, with reporting expected in 2028. Transitional reliefs are available, including a one-year deferral for Scope 3 emissions disclosures and a two-year deferral for non-climate disclosures under UK SRS S1.

Regulatory Trends and Future Considerations

The FCA's decision aligns with a broader trend of regulators moderating their stance on mandatory sustainability reporting. The EU has scaled back its CSRD and CS3D frameworks, and the US SEC is rescinding its climate disclosure rules. These changes are part of a wider programme of reform to the UK's corporate reporting framework, including a separate consultation by the UK government to simplify narrative reporting requirements under the Companies Act 2006. Companies should closely monitor these developments, as the interaction between the FCA's rules and the government's proposals will shape the reporting landscape from 2027 onwards.

Impact on Affected Companies

- TCFD Disclosures: Affected companies should review their current TCFD disclosures against the UK SRS requirements and assess how the comply-or-explain regime affects their reporting strategy. - Mandatory UK SRS S2 Compliance: Companies that had been preparing for mandatory UK SRS S2 compliance may need to reassess the scope and depth of their planned disclosures. - Signposting Requirements: Companies that would have been subject only to signposting requirements should evaluate their compliance readiness against the new requirements.

For further updates and discussions on these final rules, companies are encouraged to contact the relevant authorities and follow the provided link for subscription information.

Author: Gov. Deandrea McKenzie

Last Updated: 2026-10-28T12:04:21+07:00