UK regulator eases climate disclosure rules for listed companies

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UK eases climate disclosure rules

Highlights

From 2027, the UK Financial Conduct Authority will allow listed companies to use a comply or explain approach for climate and sustainability reporting.
The FCA dropped proposals for mandatory climate risk disclosures after industry feedback, citing competitive concerns and disproportionate burdens on smaller firms.
The UK's move aligns with the US SEC and EU, which have also eased or delayed climate reporting rules, raising concerns about reduced investor data quality and comparability.

2027 reporting regime shifts to flexibility

As first reported by Financial Times, the Financial Conduct Authority said on Wednesday that listed companies will be allowed to take a comply or explain approach to climate and sustainability reporting under the new framework starting in 2027.

The move marks a change from proposals put forward by the FCA earlier this year, when it considered making disclosure of some climate risks mandatory for listed companies while keeping certain emissions disclosures voluntary. The regulator says it drops the stricter plan after industry groups warned that tighter requirements could leave UK businesses at a competitive disadvantage against overseas rivals facing looser standards.

The FCA also says responses to its consultation show concern that the rules would place disproportionate burdens on smaller companies not materially exposed to climate or sustainability issues. Jon Relleen, the FCA's director of infrastructure and exchanges, says aligning with international standards and taking a proportionate approach supports transparency for investors and the UK's position as a market for investment and capital raising.

Global retreat raises investor data concerns

The UK decision fits a broader international retreat from tougher climate reporting rules that were previously seen as important tools for investors and lenders assessing exposure to climate-related risks. Momentum behind those rules has weakened since Donald Trump returned to the White House last year.

In the U.S., the Securities and Exchange Commission says earlier this year that it would rescind rules requiring companies to disclose climate risks to investors, describing them as burdensome and costly. The EU also recently says it will scale back and delay corporate climate and sustainability reporting rules to reduce administrative pressure on businesses and improve competitiveness across the bloc.

Pressure groups say the FCA's latest position could reduce the quality and comparability of information available to the market. Luke Hildyard of ShareAction says the decision risks leaving investors without complete, reliable and comparable data if some company boards choose not to comply.

In our earlier coverage of the FCA’s revised climate-disclosure plans for listed companies, we explained that the regulator chose to keep a “comply or explain” framework rather than introduce a mandatory new UK reporting standard. The article highlighted how business groups’ concerns about compliance costs and competitiveness shaped the change, while also noting worries that looser requirements could reduce the consistency and comparability of data for investors and lenders.

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