TCFD reporting in the UK: today’s rules and the move to IFRS S2

Picture a standard listed company six weeks from its annual report deadline, with a sustainability chapter that still reads like 2018: half a page of scenario analysis, a metrics table showing Scope 1 emissions and nothing else. The compliance team believes this satisfies comply or explain: disclose in line with the recommended disclosures, or say you have not.

But under the listing rules of the Financial Conduct Authority (FCA), it does not. A firm must say specifically where its disclosures fall short of the TCFD’s eleven recommended disclosures and what it will do to close the gap. Comply or explain is a binding listing rule, not guidance a firm can take or leave.

The framework behind that obligation is nine years old. The Financial Stability Board (FSB) set up the TCFD in 2015, and it published its final recommendations in June 2017. In the UK, following the 2020 cross-government roadmap,¹ those recommendations now sit in the FCA’s listing rules for listed companies, and in the supervisory expectations of the Prudential Regulation Authority (PRA) for banks and insurers.

TCFD’s successor is already in place. In 2023, the International Sustainability Standards Board (ISSB) published IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures) as its global successors.² On 25 February 2026 the Department for Business and Trade published the UK’s own versions, the UK Sustainability Reporting Standards (UK SRS S1 and S2), created by endorsing the IFRS standards and available for voluntary use.³ Over time, the rules governing climate disclosure in several sectors will move from a TCFD basis to an ISSB one. Because IFRS S2 keeps the very same four-pillar structure, the firms that understand today’s obligations in detail are the ones that will carry the most work across.

Four pillars, eleven disclosures

The TCFD framework organises climate disclosure around four pillars:⁴

1. Governance: the board’s oversight of climate-related risks and opportunities, and management’s role in assessing and managing them.
2. Strategy: the climate-related risks and opportunities identified over short, medium, and long terms, their impact on the business and financial planning, and the resilience of the organisation’s strategy under different climate-related scenarios.
3. Risk management: the processes for identifying, assessing, and managing climate-related risks, and how those processes integrate into the firm’s overall risk management.
4. Metrics and targets: the metrics used to assess climate-related risks, greenhouse gas (GHG) emissions disclosure, and the targets used to manage climate-related performance against them.

Scenario analysis: modelling a 2°C world

Of the four pillars, strategy is the one that generates the most practical difficulty. The reason is scenario analysis.

The framework requires firms to test their strategy against several climate scenarios, including a 2°C or lower pathway aligned with the Paris Agreement.⁵ However, the Task Force does not prescribe a specific scenario methodology, leaving firms to choose based on their own circumstances. Our guide to climate scenario analysis takes up that gap.⁶

The TCFD framework says test your strategy against climate scenarios, and encourages public reference pathways, but never says which ones.

In practice, two firms in the same sector can produce TCFD scenario analyses with entirely different warming trajectories, time horizons, and financial impact metrics. The PRA narrows that scenario choice for banks and insurers. UK firms work from recognised pathways rather than inventing their own: the Bank of England’s own climate exercise ran three NGFS-aligned scenarios, and that has set the reference point. Even so, the judgement still sits with the firm.

Listed companies: PS21/23 and the TCFD listing rule

How the framework binds depends on who a firm is. For listed companies, the route runs through the FCA’s listing rules. The FCA published Policy Statement PS21/23 in December 2021, extending the TCFD-aligned listing rule to standard listed issuers for accounting periods beginning on or after 1 January 2022.

The obligation is framed as comply or explain, and the second half carries the weight.⁷ Issuers must include a statement in their annual financial report setting out whether they have made disclosures consistent with the TCFD’s recommendations, and they must explain any gaps and set out the steps they are taking to close them.

The FCA chose comply or explain over a hard mandate to preserve flexibility while the UK awaited the ISSB sustainability standards, which were expected to be finalised by the end of 2022.

Banks and insurers: SS5/25 and supervisory expectation

Banks and PRA-regulated insurers sit outside the FCA’s disclosure regime, though life insurers are captured by it through Policy Statement PS21/24.⁸ Because they are PRA-regulated, their climate obligations are set primarily by supervisory expectation rather than a standalone disclosure rule, with the Basel Committee’s voluntary framework sitting alongside internationally.⁹

Those expectations are anchored in Supervisory Statement SS5/25, published on 3 December 2025. The baseline expectation, carried forward from SS3/19, is that firms embed climate risk into governance, risk appetite and business strategy, and build the capability to assess physical and transition risk across material portfolios. What SS5/25 adds on top is integration into IFRS 9 expected credit loss estimation and TCFD-aligned disclosure. It took effect on publication and supersedes SS3/19, subject to the transition arrangements the statement itself sets out, and our piece on the PRA raising the bar on climate risk covers what it now asks for.¹⁰

From TCFD to IFRS S1 and S2

The TCFD was always meant to be a bridge to a permanent global standard, and that standard is now here. The IFRS Foundation set up the ISSB in November 2021 to build it, and in June 2023 the ISSB published IFRS S1 and IFRS S2. IFRS S2 carries the TCFD recommendations forward directly, on the same four pillars. With that, the FSB wound up the Task Force in 2023. Both standards apply for annual reporting periods beginning on or after 1 January 2024.

The UK is partway through the same transition. The UK SRS mirror IFRS S1 and S2, and for now they are voluntary. What is not yet settled is when reporting against them becomes mandatory, and when the FCA’s TCFD-aligned listing rules (PS21/23) give way to ISSB-aligned ones. The timing is unsettled; the direction is clear.

The practical point for firms is concrete. IFRS S2 keeps the four-pillar structure, so a firm that already runs real scenario analysis across named climate pathways and can show its board engaging with the results is most of the way there. What IFRS S2 adds is depth rather than a new structure: more prescriptive metrics, quantified financial effects, and fuller emissions disclosure. The work does not start again. It continues. The firms that treated today’s reporting as a foundation rather than a filing exercise will be the ones ready first.

Frequently asked questions