UK SRS for Financial Services — Banks, Insurers, and Asset Managers

Beyond the FCA Listing Rules

For most listed companies, UK SRS obligations flow from the FCA's proposed amendments to the Listing Rules, which will require sustainability-related financial disclosures in accordance with UK SRS S1 and S2. Financial services firms, however, operate within a multi-layered regulatory environment. In addition to the FCA Listing Rules, banks and insurers are subject to Prudential Regulation Authority supervisory expectations on climate-related financial risk management, set out in SS3/19. Asset managers are subject to the FCA's Sustainability Disclosure Requirements and product-level labelling rules. The result is that financial services firms must satisfy multiple regulatory audiences with their climate disclosures, each with different objectives and expectations.

UK SRS provides a unified framework for entity-level climate disclosure, but it does not replace the sector-specific requirements imposed by prudential and conduct regulators. Financial services firms should view UK SRS as the foundation layer of their disclosure architecture, with additional overlays required by the PRA, the FCA (in its capacity as conduct regulator), and any voluntary commitments the firm has made through industry alliances.

Financed Emissions Under UK SRS S2

The most significant additional burden for financial services firms under UK SRS S2 is the disclosure of financed emissions. For banks, this means the greenhouse gas emissions associated with their lending portfolios. For insurers, it includes emissions associated with underwriting activities and investment portfolios. For asset managers, it encompasses the emissions of the companies in which they invest on behalf of clients.

Financed emissions fall within the definition of Scope 3 emissions under UK SRS S2, specifically Category 15 (Investments) of the Greenhouse Gas Protocol. For financial institutions, Category 15 typically dwarfs all other Scope 3 categories and may represent the vast majority of the firm's total reported emissions. The measurement of financed emissions is methodologically challenging. The Partnership for Carbon Accounting Financials (PCAF) has established the most widely used methodology, which attributes emissions to the financial institution based on the proportion of the investee or borrower's enterprise value that the institution finances. However, data quality varies significantly across asset classes, with corporate loans and listed equity generally offering better data availability than project finance, sovereign bonds, or securitised products.

UK SRS S2 requires companies to disclose Scope 3 emissions to the extent that the information is material. For banks and asset managers, financed emissions will almost invariably be material. The transitional relief available to mandatory reporters — which permits deferral of Scope 3 disclosure in the first reporting period — provides some breathing room, but firms should not rely on this as a permanent solution. The expectation is clear: financial institutions must develop robust financed emissions measurement capabilities.

Interaction with PRA Expectations

The Prudential Regulation Authority's supervisory statement SS3/19 sets out expectations for how banks and insurers should manage climate-related financial risks. These expectations cover governance, risk management, scenario analysis, and disclosure — the same four pillars as UK SRS. However, the PRA's focus is on the prudential implications of climate risk: whether climate-related risks threaten the safety and soundness of the firm or the stability of the financial system.

UK SRS, by contrast, is a disclosure framework aimed at providing investors with decision-useful information. The two frameworks are complementary but not identical. A firm that complies with UK SRS will produce disclosures that are relevant to the PRA's supervisory objectives, but PRA compliance requires more than disclosure alone. It requires that climate risks are embedded into the firm's risk appetite, stress testing, and capital planning frameworks. Firms should ensure that their UK SRS disclosures are consistent with the information they provide to the PRA through supervisory returns and climate risk assessments.

The PRA has also conducted the Climate Biennial Exploratory Scenario (CBES), which required participating firms to model the financial impact of different climate scenarios on their balance sheets. The climate scenario analysis requirements under UK SRS S2 are conceptually similar but differ in scope and audience. Firms that participated in CBES have a head start in terms of modelling capability, but they will need to adapt their scenario analysis to meet the specific requirements of UK SRS S2, including the requirement for at least one scenario consistent with 1.5 degrees Celsius.

GFANZ and Net Zero Banking Alliance Commitments

Many UK financial institutions have made voluntary commitments through the Glasgow Financial Alliance for Net Zero (GFANZ) or its sector-specific alliances, including the Net Zero Banking Alliance (NZBA), the Net Zero Asset Managers Initiative (NZAMI), and the Net Zero Asset Owner Alliance (NZAOA). These commitments typically include pledges to align lending and investment portfolios with net-zero emissions by 2050, to set interim targets, and to report progress annually.

UK SRS does not require companies to make net-zero commitments, but it does require disclosure of any climate-related targets that the company has set, including the metrics used, the time horizons, and progress against those targets. Financial institutions that have made GFANZ or NZBA commitments will therefore need to include these in their UK SRS disclosures. This creates a layer of accountability that goes beyond the voluntary nature of the original commitment: once disclosed under UK SRS, progress against these targets becomes subject to the same scrutiny, assurance, and regulatory oversight as any other element of the company's sustainability disclosures.

Firms should ensure that the targets they have committed to through GFANZ alliances are consistent with their UK SRS disclosures and that the methodologies used to measure progress are robust and auditable. Inconsistencies between voluntary commitments and regulatory disclosures will attract scrutiny from investors, regulators, and civil society.

FRC Assurance Regime — Implications for Financial Institutions

The Financial Reporting Council is developing an assurance framework for sustainability disclosures made under UK SRS. For financial institutions, this has particular implications for audit committees. The complexity of financed emissions measurement, the reliance on third-party data, and the use of modelling assumptions in climate scenario analysis all create assurance challenges that differ from those encountered in traditional financial reporting.

Audit committees at financial institutions should consider whether their current external auditor has the specialist capability to provide assurance over climate-related disclosures, or whether a separate sustainability assurance provider is required. They should also consider the scope of assurance: whether limited assurance over the full set of disclosures is sufficient in the initial periods, or whether reasonable assurance over specific metrics — such as Scope 1 and Scope 2 emissions — is appropriate from the outset.

Asset Managers and Portfolio-Level Disclosure

Asset managers face a distinctive challenge under UK SRS. In addition to their own operational emissions, they must consider the emissions and climate-related risks and opportunities associated with the portfolios they manage. UK SRS S2 applies at the entity level — it requires disclosure of the asset manager's climate-related risks and opportunities, not those of individual funds or portfolios. However, for an asset manager, entity-level climate risk is inextricable from portfolio-level climate risk.

Asset managers should consider how to present their UK SRS disclosures in a way that provides meaningful insight into portfolio-level climate exposures without creating inconsistencies with the FCA's product-level disclosure requirements under SDR. The entity-level disclosure under UK SRS should provide an overarching narrative that covers the firm's governance of climate risk, its strategy for managing climate-related opportunities and risks across the portfolio, and the aggregate metrics that investors need to assess the firm's climate performance. Product-level disclosures under SDR provide the fund-specific detail.

The practical challenge for asset managers is data. Measuring the financed emissions of a diversified multi-asset portfolio requires emissions data for every holding, which in turn depends on the reporting practices of investee companies across multiple jurisdictions. As UK SRS and ISSB-aligned standards are adopted globally, data availability will improve, but in the near term, asset managers will need to rely on a combination of reported data, estimated data, and industry proxies. The PCAF data quality scoring framework provides a useful tool for communicating the reliability of the underlying data to users of the disclosures.