PRI response to aligning listed issuers’ sustainability disclosures with international standards

The UK Financial Conduct Authority (FCA) is consulting on proposed rules to align sustainability reporting listing requirements with the UK versions of the ISSB standards (IFRS S1 and IFRS S2) – the UK Sustainability Reporting Standards (UK SRS).

As an important financial centre, the UK’s near-full convergence with the ISSB standards will help to provide investors with access to decision-useful sustainability information. This will help investors to allocate capital efficiently, accounting for sustainability-related financial risks and opportunities and addressing sustainability goals, while improving UK companies’ access to global capital.

The PRI’s key recommendations are for the FCA to:

• Provide companies with an extra year to report on Scope 3 emissions (i.e. disclosure in 2030) and non-climate sustainability-related risks and opportunities (i.e. disclosure in 2031), rather than having these requirements fully on a comply-or-explain basis. We acknowledge the value of an initial comply-or-explain approach but recommend a phased approach towards mandatory disclosure. 
• Ensure coherence and clarity on how UK SRS is rolled out across listed companies and an extension of the SRS to asset managers and FCA-regulated pension providers. Mandatory requirements should avoid duplication with existing sustainability reporting.
• Support transparency on third-party assurance obtained over sustainability reporting where it has been obtained voluntarily – including which elements have been assured, the scope of assurance conducted, and which conclusions have been reached. 
• Require companies in the secondary listing and depositary receipts categories to report against the UK SRS, and not just disclose which overseas sustainability standards they report against instead. This will ensure that investors can access comparable and high-quality data from these companies.
• As an interim measure until the final government decision on transition plan requirements, we welcome the FCA’s proposed safeguards to encourage companies to disclose information about their transition plans on a ‘comply or explain’ basis. We restate our position that government transition plan requirements should set out expectations to adopt, disclose and implement through best endeavours their climate-related transition plans aligned with net zero by 2050, including whether and how interim targets (5-10 years) are aligned with the Paris Agreement.

Read our full response below.