UK SRS S2: climate-related disclosures

The standard says it is set out in paragraphs 1–37 and Appendices A–C, and that all paragraphs have equal authority.

Each appendix carries the same sentence: it is an integral part of UK SRS S2 and has the same authority as the rest.

So the application guidance in Appendix B is not commentary; B17 and B30, for example, add duties of their own.

The explain limb works requirement by requirement for UK SRS S2, unlike the UK SRS S1 limb, which works risk by risk.

So a listed company that cannot make a disclosure names the paragraph it has not met, not just the topic.

It asks for steps but, in the rule text made on 24 September 2026, no timeframe.

The government’s guidance says UK SRS S1 and S2 are available for voluntary use by any entity that chooses to do so.

The FCA’s PS26/19 requires companies listed in UKLR 6, 14, 15, 16 and 22 to report against UK SRS S2 or explain, for accounting periods beginning on or after 1 January 2027, with first reports in 2028.

The consultation, CP26/5, had proposed making UK SRS S2 mandatory; the final rules adopt comply or explain across all categories of disclosure (¶1.7).

CP26/5 had also proposed only a signposting statement for secondary listings and depositary receipts; the final rules bring them onto the same comply-or-explain basis, relying on home-jurisdiction reporting where it meets UK SRS.

The FCA gives no count of companies; CP26/5 estimated around 600 would be affected, which was the consultation’s estimate.

The rules replace the TCFD-aligned listing-rule disclosures companies make today under the UK Listing Rules, explained in the FCA’s Technical Note 802.3, which the FCA now proposes to delete.

AIM securities are not admitted to the Official List (AIM Rules for Companies), so the listing categories PS26/19 amends do not cover an AIM company as such.

The who is in scope guide and the scope checker settle whether you are caught; UK SRS thresholds explains why size is not the test.

Paragraph 15 splits the financial effects into current effects, for the reporting period, and anticipated effects over the short, medium and long term, taking into account how climate is built into financial planning.

Paragraph 16 asks for four things, quantitative and qualitative: how climate has affected position, performance and cash flows this period (¶16(a)); the risks with a significant risk of a material adjustment to carrying amounts within the next year (¶16(b)); how financial position is expected to change, given investment and disposal plans — including plans not contractually committed — and planned funding (¶16(c)); and how performance and cash flows are expected to change (¶16(d)).

The examples in ¶16(d) are revenue from lower-carbon products, costs from physical damage, and expenses of adaptation or mitigation.

Paragraph 17 lets the entity give a single amount or a range.

Paragraph 18 sets the standard for anticipated effects: all reasonable and supportable information without undue cost or effort, and an approach commensurate with the skills, capabilities and resources available.

The draft FCA guidance confirms that using the ¶21 route meets the standard, so it needs no further explanation under the listing rules.

Connectivity is what makes these paragraphs hard: UK SRS S1 ¶23 requires data and assumptions consistent with the financial statements as far as the accounting framework allows.

A material transition risk to a product line, beside an impairment review that assumes the line continues unchanged, is an inconsistency an auditor will find.

S1 ¶22 requires the disclosures to identify the financial statements they relate to, and ¶24 requires the same presentation currency.

UK SRS S2 prescribes no scenario set; ¶B12 says an entity might use publicly and freely available scenarios from authoritative sources, and must have a reasonable and supportable basis for its choice.

Three published families do most of the work in practice, and preparers usually pick two or three that bracket the plausible range rather than one expected future.

The NGFS scenarios, built for financial supervisors, frame orderly, disorderly and hot-house futures, with downloadable variables.

The IEA’s World Energy Outlook 2025 carries energy-system pathways, including a Net Zero Emissions by 2050 scenario.

The IPCC’s Sixth Assessment Report supplies the physical science: Working Group I on the physical basis and Working Group III on mitigation pathways.

For UK sites, the Met Office’s UKCP18 projections and the Environment Agency’s long-term flood risk service are the usual national inputs, though the latter gives the risk of an area, not a property.

The inverse relationship in the table is why one scenario is rarely enough: an orderly transition flatters physical risk and a hot-house world flatters transition risk.

The standard asks about opportunities too, and in most reports that is the thinnest part.

What gets disclosed is the analysis and what it changed, not the model.

Paragraph 27 sets the objective: performance on climate risks and opportunities, including progress towards targets the entity has set and any it is required to meet by law or regulation.

Paragraph 28 has three limbs: the cross-industry metrics in ¶¶29–31, industry-based metrics in ¶32, and targets in ¶¶33–37.

Greenhouse gases are measured under the GHG Protocol Corporate Standard of 2004 and reported gross — the word that keeps carbon credits out of the inventory.

Scope 1 is direct emissions from sources the entity owns or controls: gas burned on site, company vehicles, process emissions, refrigerant leakage.

Scope 2 is location-based: ¶29(a)(v) and ¶B30 require the location-based figure, and ¶B31 lets an entity add market-based information; the GHG Protocol Scope 2 Guidance defines both methods.

UK SRS S2 therefore does not require dual reporting.

The consolidation split in ¶29(a)(iv) is easy to miss: Scope 1 and 2 for the parent and consolidated subsidiaries, separately from associates, joint ventures and unconsolidated subsidiaries.

The entity also discloses its measurement approach, inputs and assumptions, and why it chose them — a number without its method is not the disclosure.

¶B29 prescribes no emission factors; it requires those that best represent the entity’s activity.

UK preparers usually convert activity data with the government’s conversion factors, matching the factor year to the activity year: the 2026 methodology paper says the 2026 factors are for activity data falling entirely or mostly within 2026.

Paragraph 30 asks for all reasonable and supportable information for the exposure metrics in ¶29(b)–(d), and ¶31 points to ¶¶B64–B65 for ¶29(b)–(g).

Paragraph 29(f) on internal carbon prices is framed “whether and how”, so an entity that applies none still has something to say.

The mechanics of measuring are on carbon accounting for UK SRS, carbon accounting, Scope 1, 2 and 3 emissions and the GHG Protocol.

The FCA says in PS26/19 that it is not requiring listed companies to produce transition plans, nor introducing requirements for where they are published.

The government’s own reading is that UK SRS S2 will not require an entity to have a transition plan (DESNZ implementation routes).

Whether plans become mandatory is a question for the transition plan consultation, which closed on 17 September 2025 with no government response published.

For the content of a plan, the Transition Plan Taskforce’s work now sits with the IFRS Foundation: the TPT resources, the TPT Disclosure Framework, and the Foundation’s own guidance on transition plan disclosures under IFRS S2, published in June 2025.

UK SRS transition plans covers the drafting, and climate transition plans the wider picture.

Mark each group of requirements as disclosed, disclosed in part or not disclosed, and the builder writes a first draft of the statement the rule asks for.

If everything is disclosed, the draft is a statement of compliance, with any reliefs named.

If anything is not, it is an explanation under UKLR 6.6.6R(7A)(b), or your category’s equivalent: the requirements not met, the reasons, and the steps.

The FCA’s draft Technical Note TN 803.1, out for comment until 28 October 2026, says an explanation can be short and proportionate but should not omit material information.

It says the rules do not require an explanation for each requirement not met, that naming the headings or paragraphs is enough, and that a timeframe is not required but helps if one is known.

It wants explanations that are clear, concise and cogent, and specific to the issuer rather than generic.

If steps are being taken, that fact must be in the explanation.

And a company that explains against part of UK SRS S2 cannot make an explicit and unreserved statement of compliance with it; the draft guidance says there is no separate compliance-statement requirement in the listing rules.

The builder’s reasons are generic on purpose: replace them with the company’s own before anything is published.

UK SRS compliance covers the whole comply-or-explain statement set, including the S1 limb.

SECR is a Companies Act regime in the directors’ report, created by SI 2018/1155, and UK SRS does not replace it.

The government’s 2026 post-implementation review recommended retaining SECR with amendments.

For a listed company the SECR energy and emissions data is the obvious starting point for UK SRS S2’s Scope 1 and 2 figures: same activity data, same environmental reporting guidance, a wider frame.

A company that treats UK SRS S2 as a greenfield project while already filing SECR is paying twice for the same numbers.

SECR requirements and the SECR reporting guide cover the statutory duty.

Two of the tasks have lead times money cannot compress: Scope 3 supplier data and a repeatable scenario process.

First, reuse the SECR base: the Scope 1 and 2 energy and emissions data many UK companies already report feeds the S2 metrics directly.

Second, open the Scope 3 pipeline: screen all fifteen categories, then collect supplier data on the three or four that matter; meaningful coverage usually takes more than one cycle, which is why it starts during the relief year, not after it.

Third, build the scenario capability as a process rather than a one-off engagement: start qualitative, pick scenarios that stress the company’s real exposures, and say where the analysis is weakest.

Fourth, take the transition-plan decision at board level, because the UKLR 6, 16 and 22 statement asks whether one is published.

Throughout, capture provenance — source document, factor version, materiality rationale, reviewer — because retrofitting it later costs more than capturing it as you go.

This order is our own reading; the FCA’s nine steps in Primary Market Bulletin 66 cover the same ground as encouragement.

The readiness assessment turns this into a checklist.