The UK Sustainability Reporting Standards: The FCA's latest consultation and the comply or explain approach

What has the FCA announced and in what form?

On 30 September 2026, the Financial Conduct Authority (FCA) published Policy Statement PS26/19 alongside Primary Market Bulletin 66 (PMB 66). 

PS26/19 is the formal regulatory document containing the final rules on the UK Sustainability Reporting Standards (UK SRS) disclosures and the FCA’s responses to consultation feedback. PMB 66 provides the practical guidance, containing the consultation on Technical Note 803.1 (which sets out the FCA’s expectations for comply or explain disclosures) and implementation support. 

Together, they set out the final rules to align listed issuers’ sustainability and climate disclosures with UK SRS, the UK-endorsed version of the ISSB Standards, replacing the current TCFD-aligned framework for certain entities.

In PS26/19, the FCA rejected size based thresholds for reporting, stating that “the impact climate risks have on a company depends on the company's business model and industry-specific climate vulnerabilities, not its size.”

Transitional reliefs are built in and companies may defer Scope 3 disclosures for one year and non-climate UK SRS S1 disclosures for two years.

When do the new rules take effect?

The new rules take effect for accounting periods beginning on or after 1 January 2027, with first reporting in 2028. 

Comply or explain

All reporting under the UK SRS framework will operate on a "comply or explain" basis. 

This represents a change from the FCA's original proposals in CP26/5, which would have made climate reporting under UK SRS S2 mandatory. Comply or explain was initially intended only for non climate UK SRS S1 disclosures and Scope 3. However, smaller listed companies raised concerns about the compliance burden and the FCA responded in PS26/19 by moving towards comply or explain across the board.

How do these rules apply to investment funds and other entities?

The new rules do not apply to closed ended investment funds (UKLR 11) or open ended investment companies (UKLR 12), as the FCA considers sustainability requirements for investment vehicles should be placed on asset managers themselves rather than listed funds. 

Shell companies (UKLR 13) are also excluded as they lack substantial operations. Debt and debt like securities (UKLR 17), securitised derivatives (UKLR 18) and certain other securities are excluded, as the FCA considers extending the new requirements to these issuers would not be proportionate or effective.

What is being consulted on and when does it close?

The FCA is consulting on Technical Note 803.1, which sets out its expectations for how issuers should prepare disclosures, including when choosing to "explain" rather than “comply”. This guidance will replace guidance in previous technical notes (TN 801.4 and TN 802.3). 

The consultation closes on 28 October 2026.

How does this differ from TCFD?

The scope is significantly broader.  UK sustainability reporting previously focused on emissions, TCFD on climate, SECR on energy and carbon. 

UK SRS S1, however, extends to all material sustainability matters, including biodiversity, water availability, workforce risks, human rights and supply chain resilience. 

What does the market think?

Views are mixed, although the overall direction of travel is broadly supported. 

According to PS26/19, more than 90 percent of respondents to the FCA's consultation supported replacing the TCFD-aligned rules with UK SRS. UK Finance members have backed the reforms, noting the FCA has "struck a positive balance between ambition and flexibility" through comply or explain.

However, there is also tension. Two thirds of respondents supported comply or explain for Scope 3 disclosures given the underdeveloped methodologies and data challenges, but a significant number of the remaining third pushed for true mandatory disclosures. 

Similarly, around a third of respondents felt UK SRS S1 disclosures should have been made mandatory, arguing that a comply or explain approach "could lead to under-reporting of financially material information and reduce comparability". In PS26/19, the FCA responded by reminding issuers that they must disclose the principal risks and uncertainties they face anyway (irrespective of climate rules) and that where climate risk is among those, issuers should consider how this is appropriately reflected in their reporting even when choosing to "explain".

At the more critical end of the spectrum, the FCA's own advisory panels (the LAAP and the MPP) rejected the proposals in their joint consultation response, warning they would "position London's Main Market as an outlier" and "widen the regulatory differential" with the US and EU.

Will assurance be required?

Not initially. Companies will simply disclose whether their UK SRS disclosures have been externally assured. However, given that the relevant sustainability assurance standard (ISSA (UK) 5000) takes effect from 15 December 2026, investors may well scrutinise any annual report that states that no external assurance was obtained.

Transition plan disclosures – are they mandatory?

At this stage, the FCA is not mandating transition plans, but requires transparency about their existence. 

PS26/19 introduces a requirement for listed companies to disclose whether they have published a climate related transition plan and, if so, where it can be found. If an issuer does not have a transition plan, it must explain why. 

Are there liability risks?

Yes. Including sustainability disclosures in the annual report means they fall within the same liability regime as financial statements. This is a particular concern for forward looking statements on transition planning, since the FCA’s protected forward looking statements regime applies only to certain statements in prospectuses and certain circulars, not to annual report content.

What about overseas listed companies?

In CP26/5, the FCA had initially proposed that overseas companies with UK secondary listings simply disclose which overseas reporting standards they are subject to. However, following feedback that this could create a two tier system, PS26/19 confirms that the FCA has changed this to a comply or explain approach against UK SRS.

What should listed companies be doing now?

The FCA encourages issuers to review governance arrangements, develop data and metrics, establish internal controls, and engage with investors. It would be worth issuers mapping existing disclosures against UK SRS requirements and drafting a compliance timeline to help prepare.