FCA Sustainability Disclosure Proposals: A Turning Point for UK Market Transparency

10 April 2026

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By Rina Cindrak

The FCA’s consultation CP26/5 proposes the most significant overhaul of listed company sustainability disclosure in the UK for years. If implemented as proposed, it would end the long‑standing reliance on voluntary climate reporting and embed mandatory, standardised disclosure into the listing regime from 2027. Minerva welcomed the chance to respond and we want to share why this matters not just for compliance, but for the integrity of UK financial markets.

From Optional to Obligatory: Why the Shift Matters

For years, UK-listed companies have operated under a “comply or explain” framework for climate disclosure, aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In principle, this approach allowed companies to either provide meaningful climate data or explain why they had not. In practice, it allowed disclosure gaps to become structural rather than temporary.

CP26/5 proposes to replace this with mandatory reporting against the UK Sustainability Reporting Standards (UK SRS S2) for most listed issuers covering climate risks, opportunities, governance, strategy and scenario analysis. This aligns the UK with the International Sustainability Standards Board (ISSB) framework now being adopted across approximately 40 jurisdictions globally, from the EU to Japan to Australia.

In our consultation response, we support this move. The UK risks undermining its credibility as a sustainable finance centre if it continues to lag behind global peers on disclosure quality. More fundamentally, voluntary frameworks have simply not delivered the consistency that investors need.

“Where reporting is partial or absent, investors cannot credibly assess transition plans, compare climate resilience, or hold boards to account.”

This is not an abstract concern. As a stewardship-focused firm, our ability to engage meaningfully with boards to ask searching questions about transition strategy, to assess remuneration structures tied to climate targets, to vote with conviction at AGMs depends entirely on the quality of the underlying data. Inconsistent and incomparable disclosures obscure risk rather than illuminate it.

Scope 3: The Data Gap That Can’t Be Ignored

One of the most significant and contested aspects of CP26/5 concerns Scope 3 greenhouse gas emissions. The FCA proposes to retain a “comply or explain” approach for Scope 3, acknowledging that value-chain emissions data remains genuinely difficult to collect, particularly for companies with complex global supply chains.

We recognise these practical challenges. Scope 3 data collection requires cooperation from suppliers, customers and other third parties across, often lengthy and opaque supply chains. No assessment of this consultation can pretend the data infrastructure is fully ready.

However, our response cautions strongly against allowing “explain” to become a permanent default rather than a genuine transition mechanism. For many sectors including financial services, consumer goods and heavy industry Scope 3 emissions account for the overwhelming majority of total carbon exposure. Without this data:

Net-zero commitments cannot be meaningfully assessed or challenged
Transition plans lack the quantitative foundation investors need to evaluate credibility
Climate-linked executive remuneration structures become impossible to benchmark
Capital allocation to companies managing or mismanaging long-term transition risk is distorted

The FCA should set explicit expectations about the timeframe in which “explain” reliefs will be phased out, and should monitor whether explanations are substantive, setting out concrete steps and timelines  or if they are simply formulaic. An indefinite explain option risks locking in the very data gaps this proposed regime is intending to address.

Beyond Climate: S1 and the Broader Sustainability Picture

CP26/5 also introduces reporting under UK SRS S1, which covers sustainability risks and opportunities beyond climate including biodiversity, water, human rights, labour standards and supply chain practices. Unlike the mandatory S2 climate requirements, the FCA proposes to apply S1 on a “comply or explain” basis initially.

We support this phased approach. S1 represents genuinely new territory for many issuers, and it would be disproportionate and likely counterproductive to impose full mandatory requirements before the disclosure infrastructure and guidance have matured. A step-by-step transition allows companies to build capability without being overwhelmed.

But “transitional” must not mean “optional indefinitely.” Social and environmental risks beyond climate are increasingly influencing financial performance, credit quality, reputational exposure and critically voting outcomes at AGMs. Biodiversity loss, modern slavery risks and water stress are no longer peripheral ESG concerns: they are material financial variables.

Where S1 disclosure remains patchy, investors are forced to piece together information from unstructured sources company websites, NGO reports, media coverage, private engagement a process that is time-consuming, costly and fundamentally incomparable across issuers. The FCA should establish a clear roadmap and timeline for moving S1 to a mandatory basis.

Transition Plans: An Important but Unresolved Piece

Closely related to climate disclosure is the question of transition plans, how companies intend to align with a low-carbon economy and achieve any emissions targets they have set. The FCA’s proposals on this are notably cautious. Rather than mandating transition plan content, CP26/5 proposes simply requiring companies to state whether they have one and where it can be found.

This caution reflects the fact that the Government’s own consultation on transition plans (conducted by DESNZ) is still working through its conclusions. We understand the FCA’s reluctance to move ahead of that process. Nevertheless, the current proposal risks creating a disclosure that is more about process than substance and can become  a box-tick declaration rather than a meaningful accountability mechanism.

Our view is that transition plans should be held to the IFRS Educational Material on transition disclosures, building on the UK’s own Transition Plan Taskforce (TPT) framework. A clear structure for what a credible transition plan should contain including near-term targets, capital expenditure plans and scenario analysis is essential if investors are to use this information to drive genuine accountability.

Assurance: The Credibility Question

The consultation raises but suspends the question of mandatory assurance independent verification of sustainability disclosures. For now, the FCA proposes only that where companies voluntarily obtain assurance, they may disclose that fact transparently.

This is a pragmatic position given the current state of the assurance market, where frameworks and standards are still being developed and capacity is currently restrained. But it represents an important gap in the regime. Without assurance, the quality and accuracy of sustainability disclosures cannot be independently verified.

In our response, we encouraged the FCA to set out a clear intention to introduce mandatory assurance requirements as the market matures, and to engage actively in the development of UK assurance standards. The credibility of the entire regime ultimately depends on whether the numbers can be trusted.

Credibility will hinge on resisting dilution, setting clear end-points for transitional measures, and committing to supervision that rewards substance over optics.

Implementation: Getting the Details Right

The FCA’s intention is to finalise rules in 2026 and bring them into force on 1 January 2027, applying to accounting periods beginning on or after that date. For many companies, the first UK SRS-aligned annual reports will therefore appear in early 2028.

This timeline is broadly workable, and we note that many larger issuers already collect much of the required data due to their obligations under the EU’s Corporate Sustainability Reporting Directive (CSRD). For smaller listed companies, the implementation challenge will be more significant, and the FCA’s proportionate approach to transitional reliefs built into the UK SRS itself provides some welcome flexibility.

What matters most, however, is not just whether companies report, but how the FCA supervises the quality of what is reported. Our response flagged several implementation risks:

Boilerplate or formulaic “explanations” for non-disclosure that satisfy the letter but not the spirit of the rules
Inconsistent application of materiality assessments that allow companies to exclude data arbitrarily
Fragmented disclosure across annual reports, websites and separate sustainability reports that undermines comparability
Insufficient guidance on forward-looking scenario analysis, which is often the most contested and difficult element of S2

Robust supervision, including thematic reviews, targeted interventions and, where necessary, enforcement  will be essential to prevent the new regime from replicating the weaknesses of the old one.

Our View: A Genuine Step Forward, With Conditions

CP26/5 represents a serious and well-considered attempt to embed sustainability disclosures into the fabric of UK capital markets. The move to mandatory climate reporting, the alignment with ISSB standards, and the introduction of a broader S1 framework are all positive developments that we support.

The quality of the eventual regime will depend on choices the FCA makes in finalising the rules: the firmness with which it resists dilution under industry pressure, the clarity it provides on the trajectory of transitional measures, and finally, the robustness of its supervisory approach once the rules are live.

Better mandatory disclosure and better active ownership are complementary, not alternatives. The FCA’s proposals, if implemented well, will make both more effective. As stewardship and proxy voting advisors, we will continue working with issuers to ensure reliable disclosures and represent our clients’ interests through voting and engagement.

 

Last Updated: 10 April 2026