UK Sustainability Reporting Standards - Update

The UK is taking significant strides in promoting sustainable investment through its Sustainability Disclosure Requirements (SDR). Here's an overview of what SDR entails and the key timelines and components involved.

Introduction to Sustainability Disclosure Requirements (SDR)

Mobilising Green Investment

The UK's Green Finance Strategy aims to provide the necessary information for making informed sustainable investment decisions.

Framework for Information Flow

SDR is designed to streamline the flow of sustainability-related information between corporations, consumers, investors, and capital markets.

International Interoperability

The emphasis is on aligning with global standards, particularly the International Sustainability Standards Board (ISSB) baseline standards.

Components of SDR

IFRS Sustainability Disclosure Standards

Endorsement and Implementation

The UK is in the process of endorsing and implementing ISSB standards. A framework document detailing this process has been published by the government.

Availability Timeline

UK-endorsed ISSB standards are expected by the first quarter of 2025.

Reporting Requirements

Once endorsed, the Financial Conduct Authority (FCA) will mandate sustainability disclosures for UK-listed companies. A decision regarding non-listed companies is expected by the second quarter of 2025.

Consultation and Legislation

Any changes will undergo a consultation process and require Parliamentary approval, with new requirements effective no earlier than January 2026.

Transition Plan Disclosures

Transition Plan Taskforce (TPT):The TPT, established to help companies disclose their net-zero transition plans, released a voluntary Disclosure Framework in October 2023.

Integration with Existing Standards

The framework aligns with UK regulations, FCA rules, and ISSB standards.

FCA and Government Consultation

The FCA plans to enhance transition plan disclosure expectations, and the government will consult on disclosure requirements for the largest UK companies.

SDR & Investment Labels

FCA Policy Statement

Released in November 2023, this statement includes investment labels, anti-greenwashing rules, and disclosure rules.

Implementation Timeline

Anti-greenwashing rules take effect from May 2024, with other requirements phased in by December 2024.

Consultations on Extensions

The FCA will consult on extending these rules to portfolio managers and potentially to funds under the Overseas Funds Regime.

UK Green Taxonomy

Development Commitment

The UK aims to establish a Green Taxonomy to support green investments and combat greenwashing.

Consultation and Testing

A consultation on the taxonomy framework is expected, followed by a voluntary disclosure phase before considering mandatory requirements.

Nature-Related Disclosures

Taskforce on Nature-related Financial Disclosures (TNFD):The government encourages institutions to adopt TNFD’s recommendations on nature-related risks and opportunities.

Future Standards

The ISSB is researching nature-related risks and opportunities, with potential future standards development.

Implementation Timeline (Key Elements)

• Q1 2024: Consultation on draft UK Sustainability Reporting Standards.

• Q2 2024: UK Government consultation on transition plan disclosures and FCA consultation on extending SDR to portfolio managers.

• Q3 2024: Government consultation on extending SDR to the Overseas Funds Regime.

• Q4 2024: Assessment of IFRS standards concludes.

• Q1 2025: Publication of UK Sustainability Disclosure Standards.

• Q2 2025: Government decision on disclosure requirements for non-FCA regulated companies.

• 2026: Potential effective date for new reporting requirements.

Additional Notes

UK Green Taxonomy Consultation

A consultation on the UK Green Taxonomy is expected soon, with a voluntary testing phase before mandatory implementation.

ISSB Research Projects

The ISSB is conducting ongoing research on nature-related risks and opportunities, incorporating TNFD’s recommendations.

This comprehensive breakdown provides a clear overview of the UK's efforts to implement robust Sustainability Disclosure Requirements, ensuring a transparent and sustainable investment environment.

Full update can be found here.

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