On 25 June 2025, the UK government published three sustainability disclosure related consultations.

The first consultation (and the subject of this article) seeks views on the exposure drafts of the UK Sustainability Reporting Standards (UK SRS), which are based on the standards published by the International Sustainability Standards Board (ISSB). The UK SRS consultation is the culmination of the UK’s process to assess the suitability of the ISSB standards for use in the UK. 

The second consultation focuses on providers of assurance over sustainability related financial disclosures.

The third consultation published by the Department for Energy Security and Net Zero seeks views on the Government’s manifesto commitment on the theme of transition planning.

The focus of this note is the Department for Business and Trade (DBT)’s consultation in relation to the exposure drafts of the UK SRS. 

What are IFRS S1 and S2 and what is required to be disclosed under those frameworks?

The ISSB’s IFRS S1 and S2 standards were developed to be the global baseline for sustainability-related disclosures to meet the needs of investors and capital markets. IFRS S1 relates to General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 relates to Climate-related Disclosures. 

The standards are intended for wide adoption among a range of entity sizes and types. 

IFRS S1 requires disclose of all material information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects (i.e. cash flows, access to finance, or cost of capital) over the short, medium, or long term and is centred around the familiar pillars of:

• governance;
• strategy;
• risk management; and 
• metrics and targets.

Value chain coverage is required as well as industry specific disclosures. 

IFRS S2 is climate specific, it builds on the information required by IFRS S1 and requires additional climate related disclosures, including GHG emissions data, scenario analysis, transition plan information and certain industry based metrics. 

The former conservative government announced that they would make IFRS S1 and S2 reporting mandatory with amendments to IFRS S1 and S2 for UK specific requirements. The exposure drafts of UK SRS are therefore very similar to the IFRS S1 and S2 save for certain amendments. 

Have any amendments been made to the ISSB’s IFRS S1 and S2 in formulating the draft UK SRS S1 and UK SRS S2 and why?

Yes. The consultation states that all proposed amendments are judged to be necessary in the UK context, rather than being “nice to have” amendments. This is why there are so few amendments. 

What amendments have been made to the ISSB’s IFRS S1 and S2?

The consultation proposes six amendments to IFRS S1 and IFRS S2 as follows:

Which of these changes is most significant?

The ramping up of requirements across three years with the “climate-first” approach is one of the most significant changes and we expect will be welcomed by market participants.

Whilst there will be those who are unfamiliar with the SASB standards, they have been commonly used by sustainability professionals for more than a decade, hence there will be some who do not consider the SASB amendment to be necessary. 

Is there anything in the consultation paper particularly relevant to asset managers?

Yes. 

Financed emissions is in discussion in the consultation paper, with the consultation reporting that the technical advisory committee, which discussed the amendments concluded that clarification from the ISSB was necessary on the application of the financed emissions requirements. 

The issue relates to the availability of sustainability information being required to be reported concurrently with financial statements, when often there is a delay in obtaining sustainability information from investee companies. 

In relation to the reporting of financed emissions, clarification is required:

• that using the most up to date information available (from a previous reporting period) is acceptable; and
• on the treatment of estimates when real data becomes available for a prior reporting period in which estimates were used. 

In addition, note below the consultation paper response request in relation to the “data gap” with respect to private companies. 

Is there anything specific included in the consultation paper for private limited companies?

The Government is also going to consider whether to introduce sustainability disclosure requirements via the Companies Act 2006, which would require economically significant entities that are outside the FCA’s regulatory perimeter to report in accordance with UK SRS. 

The Government notes in the paper that the ISSB standards were developed to facilitate the provision of information to investors and other primary users of financial reports to assist in filling the “data gap” with respect to private companies. The consultation paper asks respondents to share views on the extent to which this information gap exists and notes that the provision of information could be to a “much smaller audience”. 

Are there any legal liability concerns raised with respect to sustainability-related reporting?

Yes. 

The consultation paper also seeks views on whether to extend section 463 of the Companies Act 2006 to any disclosures introduced by UK SRS. Broadly, section 463 requires a director of a company to compensate the company for any loss arising from any untrue or misleading statements in, or any improper omissions from, the company’s directors’ report or strategic report. If implemented, this would mean that directors could be personally liable if UK SRS disclosures do not meet the required level of accuracy. 

The UK government is considering if similar safe harbour provisions should apply for any reporting requirements that may be introduced by UK SRS. We note that there is work being undertaken within the legal and climate community on this issue. 

What about climate scenario analysis?

Climate scenario analysis has been difficult for those who have been subject to mandatory TCFD reporting and many do not conduct scenario analysis, on the basis that it is challenging to perform accurately. Qualitative scenario analysis is more common, however the consultation paper makes it clear that climate scenario analysis is an area of confusion and additional guidance is required. 

Who will mandatory UK SRS disclosure apply to?

We do not know at present exactly who it will apply to, however the consultation notes that there will be a forthcoming FCA consultation on proposals to require the use of UK SRS within the FCA listing rules. This is not surprising, given the additional reporting requirements of listed entities more generally. However, it is possible that UK SRS reporting will become mandatory for certain FCA authorised entities in due course, as has been the case with mandatory TCFD reporting. 

What should entities do in preparation for UK SRS?

If an entity has any particular views in relation to the matters contained in the consultation paper, then they should submit a response to the DBT, either directly or with a relevant trade association. 

Once the UK SRS’ are endorsed, they will be available to disclose against it on a voluntary basis. Some entities may choose to get ahead and prepare to report prior to mandatory reporting to allow data gaps or other areas of weakness to be ironed out, prior to formal mandatory reporting.

Asset managers should keep an eye out for any additional guidance issued by the ISSB in relation to the points of discussion in relation to financed emissions and scenario analysis. 

What are the relevant timeframes?

The consultation closes for feedback on 17 September 2025. 

We do not know when disclosure against UK SRS will be made mandatory. 

If endorsed, the Government intends to publish the final UK SRS S1 and UK SRS S2 in autumn 2025, which is an ambitious timeframe, although the proposed amendments to the ISSB standards are fairly minimal.