Consultation Response by ESG Book on UK FCA Proposed Rules for Listed Issuers' Sustainability Disclosures

Questions in this paper

Question 1: Do you agree with the proposed scope for our rules? If not, what alternative scope would you suggest and why?

Yes, we agree with the proposed scope and support the proportionate approach to the UK SRS disclosure regime. Focusing on listed issuers is appropriate given their existing familiarity with TCFD-aligned rules (now absorbed into the ISSB standards) and reflects the current maturity of climate and sustainability reporting. The inclusion of companies across the specified listing categories commercial companies (UKLR 6), secondary listings (UKLR 14), depositary receipts (UKLR 15), non-equity and non-voting equity shares (UKLR 16), and the transition category (UKLR 22) is practical. This approach also aligns with the UK government’s finalised SRS standards for large private companies, signaling an expanding universe of coverage and improving data availability over time.

Additionally, we agree with the proportionate approach underpinning the proposals, where those companies listed solely in the secondary listing or depositary receipts categories—would be subject to a more proportionate approach, requiring disclosure of the sustainability reporting frameworks applicable in their primary listing jurisdiction or those adopted on a voluntary basis. This distinction strikes an appropriate balance between enforceability and cross-jurisdictional equivalence. It also ensures a consistent baseline level of transparency across the market, while minimising red tape and administrative burden.

For listed issuers specifically, consistent and comparable disclosures strengthen global competitiveness, provide a clearer picture of company valuation and financial materiality, and help mitigate environmental, social, and reputational risks. Enhanced transparency supports long-term value creation and improves access to capital, as investors increasingly rely on sustainability and climate-related information to assess the resilience of business models.

Question 2: Do you agree that we should replace our TCFD-aligned rule (which has not been updated since 2023 due to TCFD being disbanded) and guidance with requirements to report against UK SRS S2 (and relevant aspects of UK SRS S1)? This would be for companies with a listing in the commercial companies, non-equity shares and non-voting equity shares, and transition categories. If not, what alternative approach would you suggest and why?

Yes, we support this transition. With the TCFD now absorbed into the ISSB framework—which is emerging as the global baseline for climate and sustainability reporting across more than 40 jurisdictions accounting for ~40% of global GDP, aligning UK rules with ISSB standards is a logical step.

Adopting UK SRS S2 (and relevant aspects of S1) will enhance the availability of decision-useful information for global investors, regulators, and financial institutions. Harmonised reporting requirements also reduce the compliance burden for companies operating across multiple markets.

This approach is consistent with the IFRS Foundation’s “climate first” strategy, prioritising climate-related disclosures as the foundation for broader sustainability reporting. We encourage guidance that prompts in-scope firms to begin assessing gaps between their current TCFD-aligned disclosures and the requirements of UK SRS S2 and S1, allowing for a smoother transition.

Question 3: Do you agree that the UK SRS S2 reporting requirements should apply on a mandatory basis (with the exception of Scope 3 emissions, as addressed in Q4)? If not, what alternative approach would you suggest and why?

Yes, we support mandatory application of UK SRS S2 reporting requirements.

The “climate first” approach is recommended by the IFRS Foundation’s Jurisdictional Guide, which encourages regulators to prioritise climate-related disclosures as the entry point for sustainability reporting. Several jurisdictions have adopted this phased approach when implementing ISSB standards nationally, including Singapore, Australia, and Hong Kong, reflecting an emerging global consensus.

Alignment with global climate disclosure regimes is also essential for maintaining the competitiveness and credibility of UK capital markets.

Additionally, mandatory climate reporting supports the data needs of UK financial regulators and institutions. The Bank of England (BoE) has set clear supervisory expectations regarding climate risk management, emphasising that banks and insurers must be able to identify, measure, and manage climate-related financial risks. The BoE’s SS 5/25 Supervisory Statement issued in December 2025, requires firms to embed climate considerations into governance and risk frameworks, which depends on reliable, comparable data from investee companies. Mandatory public disclosures under UK SRS S2 will strengthen the sustainable finance data pipeline, ensuring that financial institutions have access to the material climate information they need for risk assessment and capital allocation decisions.

Question 4: Do you agree that UK SRS S2 Scope 3 reporting should apply on a ‘comply or explain’ basis, for companies with a listing in the commercial companies, non-equity shares and non-voting equity shares, or transition categories? If not, what alternative approach would you suggest and why?

Yes, we support a ‘comply or explain’ approach for Scope 3 reporting, with a time-bound one year deferral as permitted by the UK SRS transitional reliefs. While the UK SRS transition reliefs provide for a two-year deferral period, it should be clearly communicated that these timelines are not intended to be extended further. The imperative to disclose sustainability-related information should be formally reinforced by the FCA, particularly given that transition reliefs have already been extended under the proposed UK SRS and risk being subject to further delay.

Value chain emissions disclosure requires significant resource and capacity building, and regulators globally are still working to develop robust, comprehensive, and standardised methodologies. Initiatives such as the GHG Protocol’s ongoing Scope 3 guidance updates and the Partnership for Carbon Accounting Financials (PCAF) standard for financed emissions are helping to improve consistency, but further convergence is needed across global climate disclosure regimes. We encourage continued engagement with the ISSB on the practical challenges of Scope 3 and financed emissions disclosures—particularly around timing, comparability, and the treatment of revised comparative data. Additional UK-level guidance on estimation techniques, data lags, and materiality interpretation development in the interim (one year deferral period) would improve consistency and reduce the reporting burden.

Question 5: Do you agree with our proposals regarding the location of UK SRS S2 climate-related disclosures? If not, what alternative approach would you suggest and why?

Yes. We agree with the proposed approach, as it supports stronger connectivity between financial statements and sustainability-related disclosures while preserving flexibility for preparers. Requiring climate-related disclosures, including any explanations on Scope 3 emissions, to be included within the annual financial report (with the option to incorporate them by cross-referencing) strikes an appropriate balance. It ensures that decision-useful sustainability information is anchored within core financial reporting, enhancing its visibility, and integration with financial performance. At the same time, allowing flexibility on the precise location of disclosures within the annual report facilitates interoperability with other reporting frameworks and requirements that companies may be subject to. This is particularly important for dual-reporting companies navigating multiple regimes.

We also support the requirement for companies to clearly specify where these disclosures are located within the annual financial report. This promotes transparency and accessibility for users without imposing overly prescriptive structuring requirements.

Question 6: Do you agree that UK SRS S1 non-climate reporting requirements should apply on a ‘comply or explain’ basis for companies with a listing in the commercial companies, non-equity shares and non-voting equity shares, or transition categories? If not, what alternative approach would you suggest and why?

We partly agree with the proposed ‘comply or explain’ approach for UK SRS S1 non-climate disclosures.

On the one hand, the approach is broadly aligned with the climate-first sequencing adopted by the IFRS Foundation and provides useful flexibility for first preparers of sustainability reports there is a steep curve in terms of transitioning from UK’s TCFD aligned regime to a fully-fledged ISSB-aligned reporting during early implementation. This can help manage reporting burden and support a phased build-out of capabilities beyond climate. On the other hand, requiring issuers to “explain” sustainability-related risks and opportunities on an interim basis places significant reliance on narrative disclosures, which are inherently difficult to standardise and limit comparability across the broader disclosure landscape.

Applying a ‘comply or explain’ basis to non-climate disclosures also risks undermining the importance of broader sustainability information and may contribute to fragmentation across the sustainable finance ecosystem—particularly as authorities such as the Bank of England (BoE) are strengthening expectations around both climate and wider ESG risks.

It may also reduce the global competitiveness of UK-listed companies. As other jurisdictions move toward more mandatory and standardised regimes, a more flexible UK approach could lead to perceptions of weaker disclosure quality and reduced comparability, potentially impacting investor confidence and capital allocation.

We therefore recommend that ‘comply or explain’ be positioned as a clear time-bound transitional measure, (previously one year in the exposure draft SRS) supported by a roadmap toward more mandatory non-climate disclosures. While the UK SRS provides a two-year deferral period, it should be clearly communicated that these timelines are not subject to further extension. The imperative to disclose sustainability-related information must be consistently reinforced by the FCA through its supervisory strategy, supported by appropriate monitoring and enforcement mechanisms to ensure timely and credible implementation. Introducing a core set of baseline sustainability reporting requirements would help ensure consistency and comparability while retaining some flexibility.

Question 7: Do you agree with our proposals regarding the location of UK SRS S1 sustainability-related disclosures? If not, what alternative approach would you suggest and why?

Yes. Please refer to the explanation provided in response to Question 5.

Question 8: Do you agree with our proposals for listed companies to disclose whether and where they have published a climate-related transition plan, if they have one, or stating why they have not published one? If not, what alternative approach would you suggest and why?

This approach is broadly aligned with the EU’s CSRD following the latest changes. Additionally, we agree with the FCA’s approach of replacing TCFD transition plan guidance with a formal IFRS S2 requirement. Requiring listed companies to state whether they have disclosed a transition plan—and where to find it, or why they have not—provides appropriate transparency without being overly prescriptive. We also support referencing the IFRS Educational Material in FCA Handbook Guidance to encourage consistency and agree that standalone rules or guidance in relation to UK SRS S2 would create unnecessary duplication for transition plan disclosure. Furthermore, we support the ongoing work of the UK Transition Plan Taskforce (TPT) for the development of a market-led disclosure framework.

More broadly, relying on voluntary transition plans risks limited real-world impact, particularly in the financial sector where influence over underlying assets is indirect. Voluntary net-zero commitments may not translate into meaningful emissions reductions. Transition plans should therefore be phased in to become mandatory and embedded within reporting, not treated as a standalone disclosure exercise. When used effectively, they can guide strategic decision-making— similar to financial reporting—and be reinforced through mechanisms such as governance and remuneration structures, ultimately strengthening their credibility and impact.

Question 9: Do you agree with our proposal to note in guidance that listed companies may wish to use the IFRS Educational Material? If not, what alternative approach would you suggest and why?

Yes, we agree with the proposal. Referencing IFRS Educational Material is helpful for supporting consistent implementation of IFRS-aligned disclosure regimes, particularly alongside core resources developed by the ISSB, such as jurisdictional guidance (e.g. the Jurisdictional Guide for the adoption or other use of ISSB Standards) and supporting educational materials reflecting the ISSB’s climate-first implementation approach.

To strengthen this further, we recommend that such guidance be presented through a centralised and easily accessible repository. This would improve usability for preparers, reduce fragmentation across supporting resources, and promote more consistent application of the standards in practice.

Question 10: Do you agree with our proposals for transparency about third-party assurance, where it has been obtained voluntarily? If not, what alternative approach would you suggest and why?

Yes, we broadly support the proposals for transparency about voluntary third-party assurance, while advocating for a proportionate and phased approach that aligns with emerging international standards.

We recommend that assurance requirements be phased in progressively, moving from limited to reasonable assurance over time, and aligned with internationally recognised standards such as the International Standard on Sustainability Assurance (ISSA 5000). At minimum, third-party assurance should cover Scope 1, 2, and eventually Scope 3 GHG emissions disclosures. This approach is consistent with developments in other jurisdictions. For example, California’s Climate Corporate Data Accountability Act (SB 253) requires mandatory third-party assurance for GHG emissions—limited assurance initially for Scope 1 and 2 emissions, progressing to reasonable assurance, with Scope 3 emissions subject to phased assurance requirements. The EU’s CSRD similarly mandates limited assurance with a pathway to reasonable assurance over time.

Question 11: What benefits and costs would arise from mandatory assurance requirements for sustainability-related information? Where possible, please include how the benefits and costs could vary depending on factors such as the type of listed company, implementation approach or level of assurance obtained. Please be as specific as possible in your response.

Mandatory assurance would bring sustainability disclosures closer to the rigour expected of financial reporting. Complex metrics such as Scope 3 emissions—often derived from estimates, proxies, and third-party data—would benefit significantly from independent verification, improving accuracy and comparability for investors and other stakeholders. Third-party assurance strengthens the credibility of sustainability claims, reducing the risk of greenwashing and building trust with investors, regulators, and the public. The discipline of preparing for external assurance typically drives stronger internal controls, data governance, and cross-functional coordination—benefits that extend beyond compliance to better strategic decision-making.

Assurance introduces direct costs (fees, staff time, systems investment) that fall disproportionately on smaller issuers with less mature reporting infrastructure. We therefore emphasise the importance of a proportionality principle mirroring approaches in comparable regimes. Under the EU’s CSRD, for example, mandatory sustainability assurance for listed SMEs is phased in later (from 2026) and initially at a limited assurance level, recognising capacity constraints.

Applying similar proportionality in the UK—through phased timelines, differentiated assurance levels, or scaled requirements—would reduce barriers for smaller listed companies while still advancing the overall quality of disclosures. This approach may also encourage voluntary adoption among out-of-scope entities seeking credibility with stakeholders.

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Question 12: Do you have any further views on sustainability assurance which we should factor into future policy development? For example, any views on the type of information that should be assured, the feasibility of limited and reasonable assurance, or over what timeframe we should revisit our approach.

Yes. Please refer to the explanation above in response to Question 10.

Question 13: Do you agree with our proposed implementation approach and transitional arrangements for the commercial companies, non-equity shares and non-voting equity shares, and transition categories? If not, what alternative approach would you suggest and why?

Yes, we agree with the proposed transitional arrangements and implementation approach for commercial companies, non-equity shares, non-voting equity shares, and transition categories. The phased approach strikes an appropriate balance between ambition and practicality:

• Mandatory UK SRS S2 climate reporting from the outset establishes a clear baseline, building on existing TCFD familiarity.
• Comply or explain for UK SRS S1 with a two-year deferral recognises that non-climate sustainability reporting requires more lead time to embed, particularly given the breadth of topics covered.
• Comply or explain for Scope 3 emissions with a one-year deferral appropriately acknowledges the data challenges inherent in value chain emissions, while still signalling regulatory expectation.
• Transition plan disclosure requirements—stating whether a plan exists and where to find it or explaining why not—provide transparency without mandating a specific format prematurely.
• Voluntary assurance disclosure at this stage allows the market to develop capacity ahead of any future mandatory requirements.

This tiered approach gives companies time to build internal capabilities and data systems, aligns broadly with transitional reliefs in comparable regimes, and avoids an unduly burdensome implementation that could compromise reporting quality.

Question 14: Would you expect to be an early adopter of our proposed new rules? If so, do you have any comments on our proposed approach?

Not Applicable.

Question 15: Do you agree with our proposals for companies in the secondary listing category and the depositary receipts category not to disclose against the UK SRS, but instead to disclose which overseas climate and sustainability standard they are subject to, or which they voluntarily adopt? If not, what alternative approach would you suggest and why?

Yes. We support the proposal on the basis that it promotes interoperability and reduces duplicative reporting and compliance burdens for internationally operating issuers. Allowing companies in the secondary listing and depositary receipts categories to disclose against an overseas standard—while clearly identifying which framework they apply—recognises the growing convergence of global sustainability reporting regimes.

However, to ensure disclosures remain consistent, comparable, and decision-useful for investors, a structured equivalence or interoperability assessment should underpin this approach. A formal mapping exercise across key frameworks would help identify any material narrative or quantitative gaps and determine where supplemental disclosures may be required. It is also important to maintain coherence with other relevant regimes, including the EU’s CSRD/ESRS and existing FCA climate-related disclosure requirements, particularly for dual-listed or dual-reporting UK companies.

Question 16: Do you agree with our proposals for transparency about third-party assurance, where it has been obtained, for companies in the secondary listing category and the depositary receipts category. If not, what alternative approach would you suggest and why?

Yes, we agree. Please refer to the explanation provided in response to Question 10.

Question 17: Do you agree with our consequential amendments to enable asset managers, life insurers and FCA-regulated pension providers in scope of UKLR to cross refer to UK SRS S2 disclosures in their TCFD entity report, where applicable? If not, what alternative approach do you suggest, and why?

Yes, we agree with the proposed consequential amendments. Enabling cross-referencing between UK SRS S2 disclosures and TCFD entity reports is a sensible and practical step. Given that UK SRS S2 is formally replacing the TCFD framework, allowing seamless cross-referencing ensures continuity of information flow and avoids creating artificial barriers between related disclosure regimes. This approach:

• Enhances decision-usefulness by allowing sustainability information to circulate freely across reporting frameworks, giving investors and other stakeholders a more coherent picture.
• Reduces duplicative compliance costs for asset managers, life insurers, and pension providers who would otherwise need to produce near-identical disclosures in multiple formats.
• Minimises administrative burden and red tape without compromising the quality or accessibility of information.

Question 18: What are the benefits and costs of digital tagging of sustainability information? For example, are there any disclosures under UK SRS for which you would find digital tagging most useful, and how would the information be used? Please be specific in your response.

Digital tagging of sustainability information using Inline XBRL (iXBRL) offers significant benefits by transforming narrative disclosures into structured, machine-readable data. Under frameworks such as the European Sustainability Reporting Standards (ESRS), tagging remains mandatory, underscoring its role in enabling consistent and scalable sustainability reporting.

The primary benefit is enhanced comparability and usability of data across companies and jurisdictions. Tagged disclosures aligned with the ISSB baseline can be directly ingested by investors, banks, and regulators into analytical tools, supporting risk assessment, portfolio alignment, and supervisory monitoring. Over time, digital tagging also reduces reliance on manual data extraction, lowering operational costs for data users and improving the efficiency of ESG data flows. However, these benefits come with notable costs. Companies face upfront investment requirements in tagging software, internal controls, and governance processes. Mapping disclosures to detailed taxonomies can be complex—particularly for qualitative information—and ongoing maintenance is required as standards evolve. There is also a risk of inconsistent tagging quality without robust validation frameworks.

Digital tagging would be most useful for UK SRS 2 disclosures aligned with IFRS S2, particularly greenhouse gas emissions (Scopes 1–3), financed emissions, and climate-related targets. These data points are highly decision-useful and can be readily standardised. Governance, risk management, and scenario analysis disclosures would also benefit from tagging, enabling regulators and market participants to assess transition preparedness at scale.

Question 19: What are your views on digital reporting? Are issuers in a position to digitise sustainability reporting, or as a service provider, to support preparers with this? If not, how long do you think it would take?

Digital reporting of sustainability information—particularly through Inline XBRL (iXBRL)—is both feasible and increasingly expected, but issuer readiness remains uneven.

As reflected in the implementation timeline under the CSRD, digital tagging is already mandatory and begins with first reports from 2025 onward, with no change following the Omnibus adjustments. This provides a clear signal that regulators view digital reporting as a core component of sustainability disclosure frameworks. At the same time, the phased rollout (2025–2030) and reduced scope—potentially covering only ~10% of originally in-scope Wave 1 entities—suggest an implicit recognition that market readiness is still developing.

Large public-interest entities (PIEs) are generally in a position to digitise sustainability reporting, particularly those already familiar with financial reporting under iXBRL (e.g., via ESEF). Many have the systems, governance structures, and access to service providers required to implement tagging. However, for other large companies and especially non-EU or first-time reporters, challenges remain around data availability, taxonomy mapping, and internal capabilities. From a service provider perspective, there is strong capacity to support preparers, particularly as digital taxonomies mature across frameworks such as those developed by the ISSB. However, scaling this support across jurisdictions and company types will take time. Overall, while a subset of issuers is ready today, full market readiness will likely align with the phased implementation timeline. A realistic estimate is that widespread, consistent digitisation will take 3–5 years, as capabilities mature, taxonomies stabilise, and preparers gain experience through successive reporting cycles.

Question 20: Do you have any comments on what we should consider when developing our supervisory strategy for the new requirements?

We would encourage the FCA to consider the following:

• Disclosure quality: Supervisory expectations should promote concise, clean and well-structured disclosures that prioritise decision-usefulness over volume, discouraging boilerplate language and encouraging clear presentation of material information.
• Balanced enforcement: The FCA should adopt a graduated and proportionate approach to enforcement, distinguishing between deliberate non-compliance and good-faith errors—particularly during the initial implementation period.

Question 21: Do you have any comments on our cost benefit analysis?

We agree with the cost-benefit analysis and support the FCA’s conclusion that the proposals will be net beneficial over the 10-year appraisal period. In particular, we welcome:

• The focus on decision-usefulness — The identified benefits around cost savings in collecting and processing sustainability information, enhanced asset pricing, and improved investment decisions reflect the real-world value of consistent, comparable disclosures.
• Recognition of broader benefits — We note the conservative baseline estimate captures only benefits to UK-based equity investors. The acknowledgment that accounting for foreign and debt investors could increase the net present value to £1.57bn underscores the wider market integrity gains from these proposals.
• Acknowledgment of data challenges — The analysis reflects the practical difficulties with data quality and estimation methodologies, particularly for Scope 3 emissions, which supports the phased comply-or-explain approach for more challenging disclosure areas.

Question 22: Do you have any comments on the assumptions made in our cost benefit analysis?

We agree with the modelling assumptions, particularly the use of a “comply or explain” approach, which supports issuer buy-in and strikes an appropriate balance between a purely voluntary regime and a rapid transition to fully scale mandatory UK SRS S1 and S2 reporting.

However, we would welcome further clarification on the NPV assumptions, particularly how costs and benefits are expected to evolve as the regime transitions from partial compliance to full compliance over time. While the model appropriately adjusts benefits downward to reflect widespread use of “explain”, it is less clear how the steady-state impacts under a fully mandatory regime would compare.

In addition, further transparency on the treatment of assurance costs would be valuable. As assurance requirements expand—especially for more complex disclosures such as Scope 3 emissions—these costs may be significant and could materially affect the overall cost-benefit balance, particularly for smaller issuers.

Finally, while the use of existing TCFD alignment is a practical baseline for estimations, it may not fully capture the additional complexity associated with general sustainability disclosures under UK SRS S1, which could affect both uptake and cost trajectories.

Question 23: Do you have any comments on our assessment of the estimated costs to listed companies? Please provide evidence to support your response to this question.

We broadly agree with the FCA’s structured approach to estimating costs, including the distinction between familiarisation, implementation, and ongoing reporting costs. However, we consider that certain elements of the analysis may lead to an underestimation of costs for listed companies.

First, the cost estimates for UK SRS reporting are based on a limited sample of issuers (8 respondents, of which 5 provided quantitative data), all of which are large companies with relatively advanced reporting practices and, in many cases, existing alignment with TCFD or EU requirements. As acknowledged in the consultation (paras 94–96), this may skew results estimates to be moderate and may not fully capture the compliance costs for less mature issuers or those outside the financial sector.

Second, the SME cost estimations may need adjustment to reflect the fixed-cost nature of sustainability reporting. SMEs are more likely to rely on external support and face a greater challenge at implementation. This suggests that smaller issuers may experience disproportionately higher relative costs, particularly in the early years, and should be noted in any estimations or costs to full or partial compliance by listed SMEs.

Third, while the FCA identifies third-party assurance as forming a significant share of additional reporting costs, these costs are not clearly disaggregated within the estimates. In practice, assurance—particularly for more complex metrics such as Scope 3 emissions—is likely to represent a substantial and recurring cost. Greater transparency on how assurance is incorporated into both one-off and ongoing cost estimates would strengthen confidence in the analysis.

Finally, the allocation of a relatively small share of total costs to Scope 3 emissions may underestimate the practical challenges associated with value chain data collection, methodological development, and ongoing verification. These activities are widely recognised as among the most resource-intensive aspects of sustainability reporting.