The UK government has released its first Sustainability Reporting Standards (SRS), designed for international comparability and compatibility for investors, and integration into financial reporting frameworks.

UK SRS S1 and S2 are based on the first standards issued by the International Sustainability Standards Board (ISSB), covering general requirements for sustainability-related financial disclosures and climate-specific disclosures.

Initially voluntary, the SRS require companies to publish sustainability disclosures in parallel with financial statements and covering the same periods.

The UK standards include minimum changes from the ISSB standards to support consistency and comparability across the other 30-plus jurisdictions committed to introducing the board’s standards. They are also broadly comparable with disclosures reported under Europe’s Corporate Sustainability Reporting Directive, revisions to which were finalised this week, alongside changes to the Corporate Sustainability Due Diligence Directive.

The introduction of the new standards marks a shift in the sustainability reporting landscape in the UK as they will replace existing requirements for disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Last month, the Financial Conduct Authority launched a consultation on proposals requiring UK-listed firms to report according to the new UK SRS from the start of 2027. Once adopted by public companies, the government is expected to extend use of SRS to large non-listed firms.

“We particularly want to see greater clarity on how the standards can become mandatory for in-scope companies through this process,” said James Alexander, CEO of the UK Sustainable Investment and Finance Association.

“An efficient transition from TCFD-aligned to SRS-aligned reporting for companies over the coming years will bring tangible benefits to both investors and reporting organisations.”

The new framework is expected to prompt investment in technologies and processes to increase the robustness and accuracy of sustainability reporting.

“We’re likely to see a growing gap between what companies are expected to report and what they can realistically measure today, particularly value chain data. Bridging that gap will require investment in data quality, not just reporting frameworks,” said Yee Chow, Head of Sustainability Strategy & Implementation at carbon accounting software firm Zevero.

“The standards move sustainability reporting closer to the core of financial and risk reporting. That’s a necessary shift, but it also means sustainability can no longer sit in a silo. It has to be operationalised across the business.”

Recent fund rules have reduced greenwashing risk for EU and UK investors, but reforms to Sustainable Finance Disclosure Regulation (SFDR) need sharper teeth to increase protection, according to new analyses. 

German NGOs Urgewald, Finanzwende, and Facing Finance found that the introduction of fossil fuel exclusions for funds using sustainability-related terms in their names led to divestments worth around €3.3 billion. However, around 600 of the 4,000 funds with green names responded to the rules from the European Securities and Markets Authority – which too effect in May 2025 – by changing their names, avoiding the need to sell securities worth €11.4 billion. 

The analysis also found that the proposed introduction by SFDR 2.0 of a ban on investments in firms pursuing fossil fuel expansion projects in funds using the new ‘sustainable’ and ‘transition’ categories would lead to divestments worth €5 billion. The NGOs said the extension of the ban to funds categorised by SFDR 2.0 as ‘ESG basics’ would require a further divestment of €100 billion held in companies that are pursuing fossil fuel expansion projects or have not communicated a Paris-aligned coal exit date.

A separate study by MainStreet Partners found that ESMA’s naming guidelines and the introduction of similar rules under the UK’s Sustainable Disclosure Requirements (SDR) regime had improved alignment between fund names and sustainability commitments, with the prevalence of naming-related penalties falling from 7% to 4.6% over 12 months. 

The firm said that greenwashing risk had stabilised, with around 25% of SFDR Article 8 funds scoring below its 3.0 (out of 5.0) threshold for ‘ESG-Assessed’, and 30% of Article 9 funds scoring below the 4.0 ‘Sustainability-Assessed’ threshold.

Under SFDR 2.0, current Article 9 funds will largely be recategorised as ‘sustainable’ while Article 8 funds will mainly fall into the ‘ESG basics’ bucket, with some classified in the new ‘transition’ category. 

Mainstreet said SFDR 2.0 would lead to stricter standards and clearer expectations for sustainable funds in Europe. “While many funds may need to adjust their strategies or reposition under the new categories, the regulation ultimately offers a more coherent and credible system for defining sustainable investment,” it said. 

A new position paper from the European Sustainable Investment Forum (Eurosif) said SFDR 2.0 would need to “establish clear, practical and robust criteria tailored to different asset classes” across SFDR categories to prevent greenwashing.

Recommendations included setting the threshold for ‘positive contribution’ at the technical level to reflect differences across asset classes, and defining the ‘proper justification’ required for the positive contribution criteria and outline the approaches that would not be eligible for each category.

Eurosif said it welcomed SFDR 2.0’s “clear rules” linking the use of sustainability-related names and marketing communications to compliance with SFDR criteria, which would prevent misleading claims.

The European Commission’s SFDR revision proposals were published last November and are now subject to negotiation in the European Parliament and Council. 

Proposed reliefs to firms disclosing under Europe’s Corporate Sustainability Reporting Directive (CSRD) would compromise the future flow of quality data to investors, according to Europe’s insurance and pensions regulator (EIOPA).

EIOPA said plans to offer relief to firms on account of “undue costs or efforts” on the provision of sustainability-related data related to own operations should be proportionate and temporary, lapsing after three years.

“A permanent relief would not satisfy investors’ needs and ability to seek improvements, as such a solution lacks incentives for undertakings to collect sustainability data related to their own operations,” said the regulator, adding that its proposed time limit would also ensure interoperability with the disclosure standards of the International Sustainability Standards Board.

The comments were part of an opinion provided to the European Commission on technical advice on the amended European Sustainability Reporting Standards (ESRS) from the European Financial Reporting Advisory Group (EFRAG).

EFRAG revised the reporting standards in line with the Omnibus 1 Directive, which reduces the scope of sustainability information required to be disclosed under CSRD, as well as the scope of firms falling under the new rules.

From 2028, companies with a net turnover exceeding 450 million, and an average of more than 1,000 employees, are due to report under the revised CSRD rules.

EIOPA said it “fully supports” the simplification efforts in the draft revisions to the ESRSs, welcoming efforts to improve readability for preparers and users, and to reinforce the role of materiality.

“It is important to ensure key quantitative sustainability data is made available by undertakings to users, including pension funds and insurance undertakings,” it said.

Earlier this month, the European Central Bank raised similar concerns, noting that the introduction of multiple reliefs, phase-ins and exemptions “will limit the availability of meaningful data and hamper the comparability of disclosures across companies”.

The removal of incentives to improve data collection and methodological efforts by reporting firms would run contrary to the CSRD objective of generating a reliable, consistent and comparable data ecosystem, said the bank.

“Transparent, comparable, and reliable sustainability information is critical for providing insights into financial risks, effectively guiding capital flows and supporting a smooth transition to a sustainable economy and the fulfilment of the EU’s Paris Agreement commitments,” it added.

Insurance firms are struggling to meet a June deadline for new Bank of England (BoE) climate risk requirements, with many citing scenario analysis as their biggest challenge.

A survey of 67 insurance firms found that 69% expected climate scenario analysis would be the most time-consuming of the increased requirements set out in Supervisory Statement SS5/25, issued last December by the Prudential Regulatory Authority, the arm of the BoE supervising insurers and other financial institutions.

However, more than half of insurers (57%) said they were still reviewing the new rules, citing lack of time, resource or expertise, contributing to uncertainty over regulatory expectations.

SS5/25 is the first shift in climate risk requirements for UK-regulated banks and insurers since 2019 and raises expectations across in the identification, governance and management of climate risks.

Regulated firms are now expected to conduct tailored, regularly updated climate scenarios, also showing how outputs are used in strategy and risk management, with methodologies clearly documented.

Under SS5/25, insurance firms must also embed climate risk into their solvency and capital assessments, with boards expected to review material climate risks, also documenting climate risk appetite across business lines.

Further, the new requirements reframe how regulators view proportionality of climate risk, meaning expectations scale with exposure to climate risk, rather than size.

The survey – conducted by tax and advisory firm Crowe – found limited confidence in defining climate risk materiality and evidencing proportionality, as required under SS5/25. Only 14% of respondents said they feel “very confident” and 57% feel only “moderately confident”, citing gaps across existing processes.

Repeal of the ‘Endangerment Finding’ by the US Environmental Protection Agency (EPA) will increase regulatory fragmentation, adding to business costs and uncertainty, forcing investors to engage directly on climate pollution rather than relying on compliance, experts have warned.

The repeal of the 2009 ruling absolves the EPA of responsibility for regulating emissions of greenhouse gases (GHGs) by US companies, having previously formed the legal basis for federal regulation across multiple industries.

The decision introduces cost and uncertainty for vehicle manufacturers and other emissions-intensive industries which have been shifting their business models to lower carbon approaches, in line with federal, state and international regulations. It may also open them to public nuisance lawsuits.

“Ignoring the economic and public health risks of climate pollution puts US leadership at risk, limits future innovation, and threatens both human health and key economic pillars,” said Anne Kelly, vice president, government affairs, at Ceres, a non-profit advocacy group and investor network.

“This repeal further increases competitive risks for US companies and undermines the economic interests of all Americans. Investors and companies have made clear that they support this crucial policy foundation.”

Rick Alexander, CEO of the Shareholder Commons, which works with investors on sustainability issues, said the withdrawal of the endangerment finding would force investors to prioritise their US climate engagement activities on portfolio companies rather than policymakers.

“US companies seeking to maximise their own profits are utterly unrestrained as to the damage created by their GHG emissions. Long-term diversified investors have both the incentive and the tools to push corporations towards climate sanity through system level investing and system stewardship,” he wrote in a LinkedIn post.

US-based asset manager Trillium Asset Management said the gap between leaders and laggards would widen in the absence of “coherent climate regulation”, adding that firms that cut emissions voluntarily would reduce their future environmental liabilities, litigation risks, and compliance costs.

“We will use our position as investors to advocate for ambitious corporate action, informed by science,” the firm said in a statement on its website.

“Corporations can meaningfully impact our climate future by setting bold GHG reduction targets, issuing transition plans on how they will meet those targets, and disclosing their progress to external stakeholders.”

Patricia Pina, Chief Research Officer at sustainability technology firm Clarity AI, said sustainability-related risks, including physical climate risk, were being priced in by capital markets, regardless of shifts in federal policy, warning that regulatory divergence added to company costs arising from investor demands for transparency and resilience.

“Forward-thinking businesses should base their strategies on economic realities rather than temporary political constructs, preparing themselves to remain competitive in the global market of the future,” she said.

“A prudent strategy is to build resilient, data-driven programmes that can flex with policy shifts. Companies that anchor their approach in science, risk management, and global market expectations, rather than short-term political cycles, will be better positioned to protect long-term value and maintain investor confidence.”