FCA Shifts UK Climate Reporting to Comply or Explain Model

The UK Financial Conduct Authority has dropped its plan to require listed companies to report climate-related information under the UK Sustainability Reporting Standards, opting instead for a “comply or explain” approach across the framework. Companies will be expected to report against the standards or explain why they have not, for accounting periods beginning on or after Jan. 1, 2027, with first reports due in 2028. The FCA said the change responds to concerns that mandatory disclosure could impose disproportionate costs, particularly on smaller firms, and affect the UK’s competitiveness, while aiming to balance companies’ burdens with investors’ need for information. The standards align with the International Sustainability Standards Board’s framework and cover sustainability-related financial risks and opportunities as well as climate disclosures; transitional relief will phase in some requirements, including Scope 3 emissions reporting. Investor and sustainability groups welcomed alignment with international standards but warned that voluntary explanations could leave investors without complete, comparable data, and called for robust disclosures and regulatory oversight.