UK regulator drops tougher climate-reporting plans after business concerns

By Phoebe Seers and Kirstin Ridley

LONDON, Sept 30 (Reuters) - Britain's financial regulator has dropped plans to require listed companies to adopt a new climate-reporting standard, opting instead to retain a "comply or explain" approach after companies raised concerns about costs and competitiveness.

The move makes the Financial Conduct Authority the latest regulator to pull back from stricter climate-disclosure rules as governments and watchdogs reassess reporting burdens on companies.

The regulator had proposed in January requiring listed companies to adopt a new UK climate-reporting standard that would cover material climate-related risks and opportunities, climate targets and the potential impact of climate change on their business.

But in final rules published on Wednesday, the watchdog said it would keep the existing "comply or explain" approach, under which companies can choose not to disclose as long as they explain why.

The decision comes as regulators and policymakers in several major economies scale back climate-reporting requirements, with the European Union watering down parts of its flagship disclosure regime and the Trump administration abandoning plans for US climate-reporting rules.

SEEKING PROPORTIONATE RULES

In their feedback on the proposals, companies had raised concerns over the costs of compliance and their impact on the competitiveness of the UK as a listing venue

The Quoted Companies Alliance, which represents listed companies in the UK, said it welcomed any regulatory measure that introduced flexibility and proportionality.

Ian Bhullar, the director for sustainability policy at industry body UK Finance, said the change will help reduce the reporting burden but could also reduce the information available to lenders and investors assessing sustainability risks and strategies.

The FCA introduced rules in 2020 that required premium-listed companies to disclose climate-related risks to investors in line with a global framework or explain why they had not done so. The rules were later extended to other listed companies.

In a review of FTSE 350 companies' 2025 annual reports, the FCA found that 92% had chosen to disclose climate risks.

Carmen Nuzzo, executive director of the TPI Global Climate Transition Centre at the London School of Economics and Political Science, said it remained to be seen if voluntary compliance would hold up over time - and whether data would become harder to compare and assess for climate risks.

"Regulatory competitiveness arguments tend to gain traction when peer jurisdictions retreat first ... particularly when jurisdictions compete for listing," she said.

(Reporting by Phoebe Seers, Kirstin Ridley and Simon Jessop, Editing by Kirsten Donovan and Elaine Hardcastle)