The FCA proposes that companies in scope move to mandatory reporting against UK SRS S2, which covers climate disclosures and is an area where reporting is already high across listed companies on the basis of the TCFD 'comply or explain' regime. However, the FCA does not currently propose requiring mandatory reporting of Scope 3 emissions data, which would instead continue to be reported on a ‘comply or explain’ basis.
Recognising that wider sustainability (non-climate) reporting (against UK SRS S1) will be new to many listed companies, and so may present additional challenges, the FCA has proposed that this will also be on a ‘comply or explain’ basis.
The FCA consultation notes that the Government is currently considering its approach to mandating adoption of transition plans. Therefore, rather than requiring adoption of transition plans, the consultation proposes that companies have to disclose whether and where they have published a transition plan, or the reason why not. The FCA also proposes requiring companies to disclose whether they have obtained third-party assurance on sustainability disclosures.
The proposals also envisage the adoption of transitional reliefs for reporting against UK SRS S2 in relation to Scope 3 emissions (1-year deferral to 1 January 2028) and UK SRS S1 in relation to non-climate disclosures (up to 2-year deferral to 1 January 2029).
Where companies have a primary listing in another jurisdiction, the proposed approach differs and will focus on requiring transparency in respect of climate and sustainability reporting requirements applicable to the company in its primary listing location or place of incorporation, including transparency around any assurance undertaken.
The FCA proposes to apply the new reporting requirements to the:
- commercial companies category (UKLR 6)
- secondary listing category (UKLR 14)
- depositary receipts category (UKLR 15)
- non-equity shares and non-voting equity shares category (UKLR 16)
- transition category (UKLR 22)
The Government has indicated that it will consult separately in due course on whether to introduce mandatory reporting requirements in respect of the UK SRS for other types of company through Companies Act reporting requirements. If this goes ahead, this could be through replacement of the TCFD-aligned reporting requirements applicable to certain types of company, including high-turnover private limited companies (with more than 500 employees and more than £500m turnover), under the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.
