The UK government unveiled plans to create UK Sustainability Disclosure Standards (SDS), for companies to use to report on sustainability and climate related risks, according to a new statement by the Department for Business and Trade (DBT). The DBT said that the standards will form the basis for any future sustainability reporting legislation or regulation.
According to the DBT, the new standards will be based on the recently published sustainability and climate-related reporting standards issued by the IFRS Foundation’s International Sustainability Standards Board. The ISSB was launched in November 2021 at the UK-hosted COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards, driven by demand from investors, companies, governments and regulators to provide a global baseline of disclosure requirements enabling a consistent understanding of the effect of sustainability risks and opportunities on companies’ prospects.
The IFRS standards were published in June 2023, and in July, IOSCO, the leading international policy forum and standards setter for securities regulators called on regulators to incorporate the standards into their sustainability reporting regulatory frameworks.
In its statement, the DBT said that it will base the UK SDS on the IFRS standards in order to ensure that sustainability disclosures by UK companies are globally comparable and useful for investors, with the UK rules diverting from the global baseline only if absolutely necessary for UK-specific matters.
The statement said:
“By using the IFRS Sustainability Disclosure Standards as a baseline, the aim is for the information companies disclose under UK SDS to be globally comparable and decision-useful for investors. The disclosures required by these standards will help investors to compare information between companies, thereby aiding decision making; supporting the efficient allocation of capital, and smooth running of the UK’s capital markets.”
The plan to launch the UK SDS follows the update earlier this year of the UK’s Green Finance Strategy, which included a pledge to assess the new IFRS sustainability and climate-related reporting standards once they are published.
The DBT added that decisions to require disclosures will be taken independently by the UK government and the Financial Conduct Authority (FCA). In 2021, the UK announced plans to require mandatory climate-related reporting for large companies, and in its updated Green Finance Strategy the government said that it would consult on requirements for large companies to disclose climate transition plans.
The DBT statement said that the Secretary of State for Business and Trade will consider the endorsement of the IFRS Sustainability Disclosure Standards, to create UK SDS by July 2024.