<\/p>\n
The UK SRS envisage the disclosure of both climate-related and non-climate related information, to help inform investor decision-making. The UK regime aligns with international sustainability reporting standards finalised by the International Sustainability Standards Board (ISSB) in 2023<\/a>. When it takes effect, it will replace the current climate-related reporting standards that are aligned with standards developed by the Task Force on Climate-related Financial Disclosures (TCFD).<\/p>\n Consulting on the new regime earlier this year, the FCA had proposed<\/a>\u00a0a two-tier approach for the UK SRS under which listed issuers would be obliged to make climate-related disclosures but would not be forced to disclose other relevant sustainability information. Instead, a \u2018comply or explain\u2019 approach for non-climate-related disclosures was proposed.<\/p>\n Now, however, the FCA has confirmed a \u2018comply or explain\u2019 approach will apply across the whole of the new regime.<\/p>\n \u201cClimate, and sustainability risks affect firms differently and the relevance of particular disclosures will depend on an issuer\u2019s business model, strategy and risk profile,\u201d the FCA said in its policy statement on the new regime<\/a> (87-page \/ 1.26MB PDF). \u201cA comply or explain approach allows issuers to reflect those differences and focus on providing high-quality, decision-useful information, rather than applying the standards mechanically in a way that could produce lengthy disclosures of limited value to investors.\u201d<\/p>\n \u201cWe expect investor and broader market demand for sustainability-related information to drive issuers to provide disclosures where climate and sustainability matters are relevant to their business model and risks. Where issuers do not provide financially material information in accordance with UK SRS, a proportionate explanation of their reasoning and judgement can itself provide useful information to investors,\u201d it said.<\/p>\n Climate and sustainability expert Hayden Morgan<\/a> and capital markets expert Dinesh Banani<\/a> of Pinsent Masons said that while UK-listed issuers already have experience of climate-related reporting under the current TCFD-aligned standards, there is still a lot of work to do to prepare for the broader scope of the new UK SRS.<\/p>\n Banani said: \u201cThis is a significant milestone in the UK’s sustainability reporting agenda and reinforces the direction of travel towards globally aligned sustainability disclosure standards across major capital markets \u2013 with jurisdictions including Australia, Canada, Japan, Singapore, and Hong Kong also adopting or moving towards ISSB-aligned frameworks.\u201d<\/p>\n Morgan said: \u201cIn-scope companies will need to focus on governance, materiality assessments, climate and sustainability risk management, transition planning, data assurance, controls, and implementation of ISSB-aligned reporting frameworks.\u201d<\/p>\n According to Banani, given the FCA’s decision to adopt a ‘comply or explain’ approach across the whole regime, companies will also need to \u201cthink carefully about how they right-size their disclosures to ensure they are proportionate and decision-useful, rather than adopting a one-size-fits-all approach\u201d.<\/p>\n The UK SRS will apply to accounting periods beginning on 1 January 2027, with first reporting in 2028. However, the FCA is providing some temporary optional relief from some of the requirements.<\/p>\n First, listed issuers will not be forced to make disclosures in related to so-called \u2018Scope 3\u2019 greenhouse gas emissions \u2013 those emissions arising indirectly in their operations via their supply chains \u2013 in respect of the first annual accounting period in-scope of the new regime. Second, a two-year relief will apply in respect of all non-climate-related information that will thereafter fall subject to disclosure.<\/p>\n","protected":false},"excerpt":{"rendered":"
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