Regulatory Body Releases Review on Financial Reporting Related to Climate Issues
The Financial Conduct Authority (FCA) has announced updates to its sustainability reporting requirements, aiming to simplify disclosure, reduce compliance burdens, and improve the decision-usefulness of reports for retail investors.
Following a comprehensive review of climate reporting practices by asset managers, life insurers, and FCA-regulated pension providers, the FCA plans to streamline its framework. This move is designed to consolidate requirements across existing frameworks such as the Taskforce on Climate-related Financial Disclosures (TCFD), the Sustainability Disclosure Requirements (SDR), and the International Sustainability Standards Board (ISSB) standards adopted as UK Sustainability Reporting Standards (SRS).
Key updates and plans include:
- The FCA will consult later in 2025 on introducing mandatory reporting aligned with the ISSB/UK Sustainability Reporting Standards (SRS) for UK listed companies, promoting international alignment.
- Asset management firms are encouraged to align reporting periods between TCFD and SDR requirements, easing reporting complexity by enabling a single consolidated report covering both frameworks.
- The updated sustainability reporting rules will consider the broader sustainability landscape, including transition plans and the ESG data challenges firms face, such as inconsistent methodologies and data gaps.
- The FCA will continue to collaborate with the UK Government and other regulators to support consistency along the investment chain and ensure new rules reflect international developments, including the ISSB standards which succeeded TCFD.
The review process involved an evaluation of firms' compliance with the FCA's climate disclosure rules, examining firms' perspectives on the current climate reporting regime set by the FCA, and assessing the effectiveness of these rules.
The findings of the review revealed that firms have integrated climate risks into their decision-making due to the FCA's rules, becoming more transparent with their clients and consumers. The updated reporting requirements are a response to these findings, aiming to facilitate efficient reporting under both the TCFD and Sustainability Disclosure Requirements.
The FCA's updated reporting requirements are part of the next steps announced following its review into firms' climate reporting, marking a move from the earlier granular TCFD-based disclosures towards a more streamlined, proportionate, and internationally aligned framework based on ISSB standards and SDR, with an emphasis on clarity and usability for all stakeholders.
[1] FCA, "Sustainability Disclosure Requirements: Feedback on CP21/35 and next steps" (August 2025) [2] FCA, "Consultation Paper 21/35: Sustainability Disclosure Requirements" (December 2021) [3] FCA, "Policy Statement 21/32: Sustainability Disclosure Requirements" (November 2021) [4] FCA, "Policy Statement 21/28: Sustainability Disclosure Requirements: Feedback on CP20/34" (October 2021) [5] FCA, "Consultation Paper 20/34: Sustainability Disclosure Requirements" (June 2020)
