UK Replaces TCFD Climate Disclosure Rules with Broader Sustainability Reporting

Key Takeaways

• What Happened: The United Kingdom’s Financial Conduct Authority (FCA) has finalized new rules replacing its existing climate disclosure requirements, previously based on the Task Force on Climate-related Financial Disclosures (TCFD), with broader reporting under the UK Sustainability Reporting Standards (UK SRS).
• Disclosure Requirements: FCA adopted a “comply or explain” approach for both UK SRS S1 (general sustainability-related disclosures) and S2 (climate-related disclosures), instead of mandating disclosures under S2 as initially proposed. Covered companies must disclose financially material climate and other sustainability-related risks and opportunities, or explain why they have not done so.
• Who Is Affected and When: The rules apply to companies in certain UK listing categories, including foreign companies with secondary UK listings. The requirements take effect for accounting periods beginning on or after January 1, 2027, with first reports expected in 2028.
• What Companies Should Do: Covered companies should assess how their existing TCFD-aligned disclosures compare with new UK SRS requirements, identify potential reporting gaps, and determine whether to rely on available transitional relief for certain disclosures.

Sustainability Disclosure Requirements

On September 30, 2026, FCA issued Policy Statement PS26/19, finalizing amendments to the UK Listing Rules that require covered companies to report against the UK SRS. Based on the International Sustainability Standards Board (ISSB) framework, the standards address financially material sustainability-related risks and opportunities that could reasonably affect a company's prospects.

The framework consists of two standards:

• UK SRS S1, which establishes general requirements for disclosing sustainability-related financial information, including risks and opportunities beyond climate change.
• UK SRS S2, which addresses climate-related financial risks and opportunities, including greenhouse gas emissions, climate-related strategy, risk management, and targets.

FCA’s rules also establish additional disclosure requirements:

• Sustainability risks: Covered companies must explicitly state in their financial reports if they have not identified any sustainability-related risks or opportunities under UK SRS S1.
• Climate transition plans: Companies in specified UK listing categories must disclose whether they have published a climate transition plan and, if so, where it is available. Companies that have not published a plan must explain why.
• Assurance: Covered companies must disclose whether they have obtained third-party assurance. If so, they must identify the assurance provider, the scope and level of assurance, the standards used, and where any published assurance report can be accessed.

The rules do not require companies to prepare climate transition plans or obtain independent assurance.

“Comply or Explain” Reporting

Although FCA initially proposed mandatory reporting under UK SRS S2, its final rules adopt a “comply or explain” approach for all UK SRS disclosures.

This means companies that do not fully report in accordance with the UK SRS must identify the omitted disclosures, explain why the information was not provided, and describe any steps they are taking or plan to take to provide the information in the future. For UK SRS S1, these explanations must identify the relevant sustainability-related risks or opportunities for which disclosures were omitted.

Scope and Compliance Timeline

The requirements apply to companies in five UK listing categories under the UK Listing Rules, including commercial companies, foreign companies with secondary UK listings, and issuers of depositary receipts. The rules do not apply simply because a company operates in the UK. Certain listings, including those solely for debt securities, investment funds, and shell companies, are excluded.

The requirements apply to accounting periods beginning on or after January 1, 2027. For companies reporting on a calendar-year basis, the first disclosures will appear in their 2027 annual reports, published in 2028.

FCA has established optional transitional relief allowing companies to defer:

• Scope 3 greenhouse gas emissions disclosures for one year; and
• non-climate sustainability disclosures under UK SRS S1 for two years.

Companies relying on these provisions must disclose this in their annual financial reports, but need not otherwise explain the omitted information during the applicable periods.

Implications for Companies

Covered companies will need to assess whether their existing climate reporting practices align with the new requirements and whether they must disclose additional sustainability-related information.

Companies with established TCFD reporting processes may already have much of the information needed for climate-related disclosures. However, they should evaluate whether those processes meet the more detailed UK SRS requirements or whether they need additional assessments, data collection, or coordination across legal, finance, risk management, or sustainability functions.

Although the comply-or-explain framework offers flexibility, companies should bear in mind that explanations regarding omitted disclosures will be included in public annual reports and may invite scrutiny from investors and regulators. Companies already reporting on climate-related topics in other mandatory or voluntary disclosures should consider those disclosures and ensure consistency where appropriate.

For multinational businesses, alignment with the ISSB standards generally creates opportunities to streamline reporting. However, differences in how the ISSB standards are implemented, in particular the degree of flexibility provided to omit certain disclosures, mean companies must still pay close attention to jurisdiction-specific requirements.

Looking Ahead

Companies should begin assessments before the 2027 reporting period to allow time for any necessary changes and take advantage of available transitional relief.

FCA also consulted on proposed technical guidance concerning the comply-or-explain approach. The comment period closed on October 28, 2026, and FCA expects to finalize guidance before the new rules take effect on January 1, 2027.

Beveridge & Diamond is not authorized or regulated to practice law in the United Kingdom. This alert is provided for general informational purposes and does not constitute UK legal advice.

Beveridge & Diamond’s ESG, Climate Change, and International practices help clients with operations in the U.S. and abroad navigate complex regulatory, litigation, and transactional matters involving greenhouse gas regulation, climate disclosures, and emissions reporting programs. We counsel companies across industry sectors on compliance strategies, regulatory advocacy, and sustainability initiatives, including voluntary and supply chain reporting. For more information, contact the authors.