The UK government has long led efforts to encourage organizations to identify and disclose climate-related financial risks and opportunities. More recently, it introduced the UK Sustainability Reporting Standards (UK SRS).
In this article, we break down the UK SRS, what they mean for investor transparency and what UK-based organisations should do next.
Published by the Department for Business and Trade (DBT) in February, the UK SRS aim to position the UK as a global leader in sustainable finance by ensuring high-quality, reliable data for investors and other users of general-purpose financial reports.
The new sustainability reporting standards build on the International Sustainability Standards Board (ISSB) and align with the global baseline set by the IFRS Sustainability Disclosure Standards, with some UK-specific modifications.
One notable modification relaxes IFRS requirements to reference or assess sector-specific and SASB-based materials. Instead, the UK SRS allow entities to refer to these topics and disclosures at their discretion.
What the UK SRS Cover
The UK SRS broaden the scope for companies previously aligned with the UK’s mandatory TCFD-based climate disclosures, extending beyond climate to cover all sustainability-related risks and opportunities that could reasonably affect enterprise value.
UK SRS S1 introduces general requirements, providing an overarching framework for sustainability-related financial disclosures including environmental matters like pollution and resource use, and social issues like health and safety and labour practices.
This shift inserts a broader range of international sustainability topics into strategic and financial decision-making and aligns with other global frameworks.
Continued Focus on Climate Risks
UK SRS S2 maintains a climate-specific focus broadly aligning with IFRS S2 in identifying and managing climate-related risks and opportunities. Investors remain keenly interested in climate-related financial risks tied to natural disasters like last year’s California wildfires and unusually strong hurricanes in the North Atlantic that caused enormous property damage.
In the UK, ABI data shows insurers paid £1.2 billion weather-related property claims in 2025, a 14% increase on 2024. Global losses from natural disasters totalled $224 billion in 2025, of which only $108 billion was insured.
UK SRS S2 helps give investors what they need to know about climate-related risks and efforts around mitigation and adaptation. And it provides companies with a structured and consistent means of meeting expectations on greenhouse gas emissions (GHG), including Scope 3 reporting.
The standards are already published, allowing companies to adopt them voluntarily while formal approval is pending. Although not yet final, Financial Conduct Authority (FCA) proposals suggest the S2 module, along with parts of S1, could become mandatory for certain UK-listed companies, with some requirements on a comply-or-explain basis.
How the Standards Interact with Other International Frameworks
Several similarities and synergies exist between the new UK SRS and other international frameworks. Both UK SRS S1 and UK SRS S2 follow the guiding principles popularized by the TCFD in 2017, and later adopted by EFRAG’s ESRS. The standards are built around the four pillars of governance, strategy, risk management, and metrics and targets that help embed sustainability within strategic and performance measurement structures.
UK SRS differ slightly from other frameworks by how it treats materiality. Unlike frameworks that apply the double materiality principle (impact + financial), the UK SRS adopts an enterprise value-based materiality lens that focuses on sustainability-related risks and opportunities that can affect an organization’s enterprise value. This enables UK-headquartered companies operating in the EU to design a single, integrated framework that reduces duplication and improves strategic oversight.
UK SRS S1 and UK SRS S2 Status
In February, the UK published the final versions of UK SRS S1 and UK SRS S2 that are available on GOV.UK. Separately, the Financial Conduct Authority (FCA) is consulting on updated Listing Rules, to align in-scope listed issuers’ disclosures with UK SRS.
The consultation paper CP26/5 introduces mandatory reporting under certain UK SRS S2 (climate disclosure) elements for in-scope entities, with other elements subject to a “comply or explain” approach. The consultation is currently open, with responses due 20 March 2026, and a policy statement is anticipated from the FCA in autumn 2026. The outcome of this consultation will determine the extent to which UK SRS S1 and S2 are incorporated into the FCA Listing Rules, and therefore become mandatory for in-scope listed issuers, with a proposed effective date of 1 January 2027.
What to do now
While the FCA’s proposal is not yet approved, the finalized UK SRS is available for voluntary use. This means organizations can start using the most helpful guidance sections to increase resilience and build investor confidence. Initial alignment steps include:
- Determining the reporting perimeter and target capital market audience
- Conducting a structured gap assessment between historic TCFD-style disclosures and new UK SRS S1/S2 requirements
- Reviewing and formalizing the materiality process with the sustainability-related risks and opportunities and enterprise value model, and alignment with the ESRS double materiality principle
- Developing a roadmap for data collection, particularly for Scope 3 emissions scenario analysis and audit-readiness
- Monitoring the FCA consultation outcome and prepare for the 1 Jan. 1, 2027 effective date if in-scope, or consider early voluntary adoption to strengthen investor confidence.
Navigating the transition to UK SRS requires careful planning across governance, risk and data processes. If you would like tailored guidance on your next steps, please contact Sphera.
