From TCFD to UK SRS S2: What is changing?

What is the issue?

The FCA has issued a consultation proposing that UK-listed companies will be required to report under UK SRS; the UK’s adaptation of the International Sustainability Standards Board’s (ISSB) standards from 2027. UK SRS currently consists of two standards: SRS S1; which covers general sustainability requirements and SRS S2; which is specifically on climate risk.

Implementation of the new standards will be phased in over three years, with companies required to report on climate under SRS S2 first and, in 2029 on more general sustainability impacts under SRS S1. 

Many of the companies affected have reported climate risks and opportunities under TCFD-aligned rules since 2021 which, while similar to SRS S2 has some additional requirements. SRS S1, when implemented, is likely to require significant additional reporting. We will cover these additional requirements at a later date.

The proposal is highly likely to be implemented in a form very similar to the consultation document and as such companies need to prepare for this change.

How do SRS S2 and TCFD differ?

Although both frameworks are built upon the same four pillars, Governance, Strategy, Risk Management, and Metrics & Targets, the SRS S2 standard introduces more specific and detailed requirements, reinforcing expectations for transparency and integration across all areas of climate reporting.

What does this mean?

1. Governance

Under SRS S2, organisations must provide more formalised evidence of governance structures overseeing climate-related risks and opportunities. This includes documentation such as:

• Board responsibilities and relevant terms of reference
• Defined mandates and role descriptions for board committees or management
• Policies and procedures guiding climate-related oversight

The intention is to make governance processes around climate oversight demonstrable and auditable, although many companies are already providing much of this information.

2. Strategy

The Strategy pillar under SRS S2 expands on TCFD requirements. Companies are asked for more specific information about the company in some areas but requirements are less prescriptive in others such as which scenarios to use in scenario planning. Disclosures should aim to provide sufficient information to enable users of financial reports to understand how climate-related risks and opportunities affect the organisation’s business model, strategy, and financial planning. This includes:

• Identification of where, within the value chain, climate risks and opportunities are most significant
• Disclosure of transition plans if these are in place, progress achieved, and remaining gaps
• Quantitative and qualitative information, including material assumptions and uncertainties
• Explanation of how the business model may evolve over time to remain resilient

This greater specificity is intended to enhance the usefulness of climate disclosures for investors and stakeholders. There are, however, a number of exemptions and arrangements intended to achieve proportionality and reduce costs where these provide limited useful information.

3. Risk Management

SRS S2 strengthens the integration of climate risk within existing enterprise risk management frameworks. Entities are required to describe in detail:

• The processes used to identify, assess, and manage climate-related risks
• The input parameters, data sources, and assumptions underpinning their analyses
• The use of scenario analysis to test resilience and inform decision-making
• Changes in the nature or magnitude of climate risks compared with previous reporting periods

This approach ensures that climate-related considerations are embedded within broader organisational risk processes, rather than treated as a standalone exercise.

4. Metrics and Targets

The SRS S2 standard introduces enhanced requirements for the disclosure of metrics and targets, promoting greater consistency and comparability. Companies must disclose:

• Industry-specific metrics relevant to their sector
• Material Scope 1 and Scope 2 greenhouse gas emissions
• Scope 3 emissions on a “comply or explain” basis after an initial one year relief
• Objective of the targets, such as consistency with a 1.5°C pathway, along with progress and performance tracking

Third‑party assurance is encouraged, although not mandated, to strengthen confidence in disclosed data and where TCFD mandated emissions disclosures, SRS S2 only requires disclosures where these are material.

Summary

The UK’s adoption of SRS S2, based on IFRS S2, represents the next stage in the evolution of climate-related financial disclosure. TCFD established the framework principles and SRS S2 builds on this through increased detail, potentially broader metrics and standardisation. The cost of compliance here is offset to some extent by greater focus on materiality and exemptions on the basis of proportionality.

For organisations already producing comprehensive TCFD-aligned disclosures, the transition will involve refinement and expansion rather than a complete overhaul. However, those with limited quantitative analysis or vague qualitative statements will need to significantly improve on the depth and precision of their reporting.

Early preparation - audit teams should ensure clients have processes in place to address these changes such as conducting a gap analysis between current TCFD reporting and S2 requirements to ensure timely compliance and to demonstrate robust climate governance in line with these new regulatory expectations.

Who is it applicable to?

Principally commercial equity listed companies on the main exchange of the London Stock Exchange (but not investment trusts, companies which list only debt or those listed on AIM).

Where can I get more guidance?

We would expect the FCA Consultation response to be announced by July 2026 and as disclosures evolve we will review emerging practice. We will also look at how S1 disclosures are developing.