UKSIF response: FCA CP26/5- Aligning listed issuers’ sustainability disclosures with international standards
While UKSIF largely welcomes many of the FCA’s consultation proposals, we would encourage the regulator to reconsider certain aspects of the measures to ensure that the UK framework can fully support the ISSB’s role in advancing transparency, comparability, and clarity in international sustainability reporting. Please find below our executive summary from our response.
Executive summary – main points in UKSIF’s response
- Support for evolution in the UK’s sustainability reporting landscape towards the SRS: We broadly welcome the proposed shift outlined by the FCA to replace existing climate-related disclosures for in-scope UK listed companies with requirements referencing the SRS S1 and S2. This represents an important milestone in the continued evolution of the UK’s sustainability reporting framework, which we expect will deliver tangible economic benefits and efficiencies for both in-scope companies and users of reporting (e.g. reduced cost pressures in time for preparers reporting). The SRS will in time deliver greater consistency in reporting and enhanced interoperability with global reporting standards, supporting investors with a global presence to more effectively compare their investments. It is positive to see the SRS S2 requirements as proposed largely applying relatively quickly from 2027 for listed companies.
- Clarity on Scope 3 GHG emissions reporting for in-scope companies: We recommend that the FCA sets out a clear and gradual pathway towards mandatory reporting of Scope 3 emissions for in-scope listed companies. We believe that such an approach would recognise practical challenges some organisations face in measuring and reporting Scope 3 data, while importantly providing forward-looking clarity on this area of reporting to companies, investors, and wider stakeholders. As part of a ‘mandatory pathway’, we would support the regulator setting out specific timeframes for mandatory reporting. For example, from 2030 by which point we would expect many in-scope companies will have built necessary capacity and understanding. Should this approach not be drawn on, our secondary preference would be for the inclusion of a defined ‘review clause’ (for example after 3-4 years) for the regulator to re-assess the approach to Scope 3 reporting.
- Changes to rules for companies with a secondary listing in the UK: A further key recommendation in our response relates to the proposed treatment of companies with a secondary listing in the UK. Our preferred recommendation is for this group to be subject to broadly equivalent disclosure expectations under the SRS as other in-scope entities, which we believe would build on the existing approach taken under the TCFD regime. This should include those secondary listed issuers based in a home jurisdiction where no climate-related reporting standards exist. Our response sets out secondary options for consideration to ensure a proportionate approach, while minimising material disclosure gaps among issuers.
- Reporting under the UK SRS S1: Similarly to our views on Scope 3 emissions reporting, we support confirmation of a clear and gradual pathway towards mandatory reporting under SRS S1 for in-scope listed companies, with specific reporting timeframes outlined. For example, this could be from 2030 onwards for mandatory reporting. This would be an important step particularly where sustainability-related information is financially material for investors. Our secondary preference would, similarly, be confirmation of a ‘review clause’ (for example after 3-4 years) by the regulator to assess the future approach to SRS S1 reporting for issuers, particularly as reporting practices among companies and wider stakeholders continue to evolve over time.
- Clarification on SRS disclosures applying to asset managers and FCA-regulated pension providers: We would welcome further clarification on the envisaged scope of the SRS requirements for these groups, with a view to minimising duplication in sustainability-related reporting at both product and entity-level. Some uncertainty remains around how the proposed ‘cross-referencing’ provisions would operate in practice for our members. Linked to this, we continue to encourage policymakers at large to provide clearer guidance on the practical transition from the current TCFD-aligned disclosure framework to SRS-based reporting for companies in the coming years. As the SRS regime is rolled out across the economy in the coming years, the regulator could consider a single source of information (e.g. on its website) that clearly outlines, in an accessible way, the scope of all companies subject to its disclosure rules. This would be for both listed issuers and institutional investors.
- Support for good-quality, proportionate transition planning across the economy: We look forward to seeing the outcomes shortly of the government’s consultation on climate transition plans, and we recognise that the FCA’s proposals will ultimately need to align with government’s wider policy direction and the conclusion of its process here. More broadly, we restate our support for policymakers to move forward with a ‘pathway approach’ to mandatory transition plan disclosure for large listed and large privately owned companies, building on the scope and foundations of the existing Task Force on Climate-related Financial Disclosures (TCFD) aligned regime.