UK SRS for financial services

A multi-layered regulatory environment

Financial services firms in the UK operate within a multi-layered climate-related regulatory environment. UK SRS1 provides the disclosure layer for entity-level climate-related financial reporting. The PRA6 supervises prudential management of climate-related financial risks. The FCA8 imposes conduct-related disclosure requirements at the product level for asset managers. Voluntary GFANZ alliances4910 establish industry-led net-zero commitments.

UK SRS does not replace the other layers — it sits alongside them. Financial institutions should view UK SRS as the entity-level disclosure foundation, with prudential, conduct, and voluntary overlays each addressing distinct regulatory and stakeholder needs.

Financed emissions dominance

For most non-financial corporates, Scope 1 and Scope 2 emissions (own operations and purchased energy) are dominant in operational terms even when Scope 3 is larger in absolute size. For financial institutions, the position is inverted. Operational emissions are typically small — an FI's own office buildings, business travel, and IT are dwarfed by the emissions associated with the assets it manages, lends to, or insures.

Category 15 (Investments) of the GHG Protocol Corporate Value Chain Standard1 — which captures financed emissions for financial institutions — typically accounts for 95% or more of an FI's total Scope 3 footprint when measured comprehensively. The remaining categories (business travel, employee commuting, purchased services) are operationally meaningful but quantitatively minor in the FI context.

This inversion has practical consequences:

• Scope 3 disclosure effort concentrates almost entirely on Category 15 / financed emissions, not on supplier engagement for purchased goods
• Data infrastructure investment is portfolio-data infrastructure (investee emissions data) rather than supplier data infrastructure
• Methodology choices (PCAF [3] in particular) drive disclosed figures more than data collection per se
• Industry classification of investees materially affects disclosed financed emissions
• Scenario analysis (paragraph 22 [1]) focuses on transition risk to portfolio holdings, not operational climate risk to the FI's own assets

Asset management — paragraph B60

UK SRS S2 paragraph B601 sets out specific requirements for asset managers. The required disclosures are:

• Absolute gross financed emissions disaggregated by Scope 1, Scope 2, and Scope 3 of investee companies
• Total assets under management (AUM) included in the financed emissions measure
• Percentage of total AUM in scope
• Methodology used to calculate financed emissions
• Allocation method (typically the PCAF [3] attribution factor based on outstanding amount as a proportion of investee enterprise value including cash, or as a proportion of equity for listed equity holdings)

The entity-level scope is important. Paragraph B601 requires disclosure at the asset manager level, not at the individual fund level. The asset manager aggregates financed emissions across all funds and strategies it manages, applying consistent methodology.

For UK asset managers also in scope of FCA SDR8, product-level disclosures operate separately. SDR requires pre-contractual, ongoing, and consumer-facing disclosures at the fund level, with investment labels (Sustainability Focus, Sustainability Improvers, Sustainability Impact, Sustainability Mixed Goals)8 reflecting investment strategy. UK SRS entity disclosure and SDR product disclosure are complementary — the methodology used for UK SRS Category 15 should be the same methodology informing SDR product disclosures, with consistency in disclosed figures.

Commercial banking — paragraph B61

UK SRS S2 paragraph B611 sets out specific requirements for commercial banking activities. The required disclosures cover:

• Absolute gross financed emissions disaggregated by Scope 1, 2, and 3 of borrowers and counterparties
• Gross exposure to each industry (using GICS or — under UK SRS [1] / ISSB amendment Dec 2025 [13] — alternative classification system)
• Percentage of gross exposure included in the financed emissions measure
• Industry classification system used and rationale for the choice
• Methodology and data quality information by industry by asset class
• Asset class disaggregation: loans, equity, bonds, project finance, mortgages, motor vehicle loans, commercial real estate, sovereign debt

The PCAF Global Standard3 provides methodology for each asset class. PCAF data quality scoring on a 1-5 scale (1 = highest quality, 5 = lowest) allows banks to communicate the reliability of underlying data — Score 1 represents verified emissions data; Score 5 represents emissions estimated from sector averages.

For UK banks subject to PRA SS3/196 climate-related financial risk management expectations, UK SRS disclosures should be consistent with the information provided to the PRA. The two regimes are complementary — PRA SS3/19 focuses on prudential resilience (capital adequacy, risk management governance), UK SRS focuses on investor disclosure — but should share underlying data and methodology choices.

Insurance — paragraph B62

UK SRS S2 paragraph B621 sets out specific requirements for insurance activities. The insurance case is operationally the most complex because it covers two distinct emission categories:

Insurance-associated emissions (underwriting)

Insurance-associated emissions are the GHG emissions of the activities being insured. Methodology was published by PCAF in 2022 as the PCAF Insurance Standard3. Required disclosures include absolute gross insurance-associated emissions by Scope 1, 2, 3 of insured entities, gross premiums or premium-weighted exposure, percentage of premiums in scope, and industry breakdown of insured activities.

Investment portfolio emissions

Insurers also typically have substantial investment portfolios. The same financed emissions disclosures applicable to asset management (paragraph B601) apply to the insurer's investment portfolio — disaggregated by Scope 1, 2, 3 of investee companies, total assets, percentage in scope, methodology.

Reinsurance considerations

Reinsurance arrangements create methodological complexity — the same insured activity may appear in multiple insurers' disclosures. The PCAF Insurance Standard3 provides treatment for reinsurance, typically by reducing the cedant's gross premiums proportionally. UK insurers using reinsurance should disclose the treatment applied.

UK paragraph B59A — reporting period flexibility

UK SRS S2 paragraph B59A1 is the most operationally significant UK-specific amendment for financial institutions. It is a UK-specific addition not present in IFRS S2 — and it addresses a practical reality that affects almost all UK FIs.

The provision: financial institutions may disclose financed emissions for a reporting period DIFFERENT from their financial statements where alignment is impracticable1. The practical issue this addresses: financed emissions calculation depends on investee company emissions data, which is typically available with a 6-18 month lag relative to the FI's own reporting cycle. For a UK bank with a December year-end, investee company emissions data for the same December year-end is not available in time for the Annual Report publication in March or April.

Where an FI uses paragraph B59A1, three specific disclosures are required:

• The reasons why alignment with the financial statements reporting period is impracticable
• The measurement approach taken — including which investee reporting period was used and how it relates to the FI's reporting period
• The timeline for aligning the financed emissions reporting period with the financial statements reporting period

For multi-jurisdictional FIs reporting under both UK SRS and IFRS S21 in other jurisdictions, paragraph B59A applies to UK-published disclosures. IFRS S2 reporters in jurisdictions without an equivalent provision may need to handle the data lag differently — through estimation methodologies or supplementary disclosures.

PCAF methodology and data quality

UK SRS S21 does not mandate a specific methodology for financed emissions calculation. The Partnership for Carbon Accounting Financials (PCAF)3 Global GHG Accounting and Reporting Standard for the Financial Industry is the de facto methodology used by UK financial institutions.

PCAF covers the major FI asset classes: business loans and equity, listed equity and bonds, project finance, mortgages, motor vehicle loans, commercial real estate, sovereign debt, and (from 2022) insurance underwriting3. For each asset class, PCAF provides:

• Attribution methodology — how to allocate investee emissions to the FI based on the FI's stake or exposure
• Calculation formula — how to combine attribution with investee emissions data
• Data quality scoring — a 1-5 scale (1 = highest quality, 5 = lowest) reflecting the reliability of underlying emissions data

The PCAF data quality scoring is operationally valuable for FI disclosures. UK SRS S21 requires methodology and data quality disclosure — the PCAF scoring framework provides a defensible structure for communicating this. A bank reporting Scope 3 financed emissions can state "70% of portfolio is Score 1-2 quality, 25% is Score 3-4, 5% is Score 5" — providing investors with a clear sense of underlying data reliability.

Alternative methodologies are permitted under UK SRS — entities may use sector-specific approaches, internal models, or hybrid approaches. Where alternatives to PCAF are used, the entity should disclose the methodology and the rationale.

Industry classification flexibility

IFRS S2 originally mandated GICS (Global Industry Classification Standard) for industry breakdown of financed emissions. UK SRS S21 permits alternative classification systems where GICS is impracticable — a flexibility now also reflected in updated IFRS S2 following ISSB amendments published in December 202513.

Common alternatives:

• NACE — European Union Statistical Classification of Economic Activities (widely used by European-headquartered FIs)
• SIC codes — UK Standard Industrial Classification (commonly available in Companies House data for UK borrowers)
• ICB — Industry Classification Benchmark (often used in investment management)
• BICS — Bloomberg Industry Classification System
• Internal industry classification systems

UK FIs using alternative classification systems must disclose the system used and the rationale1. The alternative chosen must be capable of providing the disaggregation required by paragraph B611 for banking and the equivalent provisions for asset management and insurance.

The choice has real consequences for comparability. Two banks classifying the same borrower differently (e.g. one as "Energy" and another as "Utilities") will produce different industry-level disclosures even with identical underlying portfolio composition. Investors comparing FI disclosures need to understand classification choices.

NGFS scenarios for FI scenario analysis

UK SRS S2 paragraph 221 requires scenario analysis to support a resilience disclosure. For UK financial institutions, the Network for Greening the Financial System (NGFS) scenarios5 are the de facto reference framework.

The NGFS published an updated Guide to Climate Scenario Analysis on 13 November 20255, organised around four scenario families:

• Orderly transition — early, coordinated action consistent with limiting warming to well below 2°C
• Disorderly transition — delayed or fragmented action, sharper short-term economic disruption
• Hot House World — limited or no policy action, severe physical risk outcomes
• Too Little Too Late — limited action with severe physical and transition consequences

The 2025 update added more granular short-term scenarios for near-term risk assessment5. NGFS scenarios are used by the Bank of England in supervisory exercises7 and are widely cited in UK financial institution paragraph 22 disclosures.

For most UK FIs, scenario analysis under paragraph 221 uses at least two NGFS scenarios — typically one orderly transition pathway (consistent with the latest international agreement on climate change) and at least one higher physical risk scenario (Hot House World or Too Little Too Late) to test resilience against transition failure.

PRA SS3/19 alongside UK SRS

UK banks and insurers are subject to PRA Supervisory Statement SS3/196 — Enhancing banks' and insurers' approaches to managing the financial risks from climate change. The statement was published April 2019 with updates in October 2021.

SS3/196 sets out four expectations:

• Governance — board-level engagement, senior management responsibility, organisational arrangements
• Risk management — climate financial risks embedded in existing risk management framework
• Scenario analysis — scenario analysis to inform strategy and risk management
• Disclosure — disclosure of climate-related financial risks (now connected to UK SRS [1])

The Bank of England conducted the Climate Biennial Exploratory Scenario (CBES) in 2021-20227, testing UK bank and insurer resilience under three NGFS-aligned scenarios5. Results published May 20227 established UK financial sector baseline modelling capability and highlighted areas of vulnerability — particularly to disorderly transition scenarios.

UK SRS1 and SS3/196 are complementary regimes:

• SS3/19 focuses on prudential resilience — capital adequacy, financial stability, supervisory information
• UK SRS focuses on investor disclosure — enterprise value materiality, decision-useful information for capital providers
• Both share underlying data and methodology choices — emissions data, scenario assumptions, exposure measurement
• Both apply the four-pillar-style architecture, though SS3/19 categories (governance, risk management, scenario analysis, disclosure) differ slightly from UK SRS four pillars (governance, strategy, risk management, metrics & targets)

For UK banks and insurers, the practical approach is integrated programme management — single climate risk infrastructure feeding both SS3/19 supervisory reporting and UK SRS investor disclosure. Divergence between the two regimes would be operationally inefficient and a credibility risk.

FCA Sustainability Disclosure Requirements

The FCA Sustainability Disclosure Requirements (SDR)8, published as FCA PS23/16 in November 2023, apply to UK asset managers and certain other FCA-regulated firms. SDR operates at the product level — covering individual funds and investment products — and is distinct from UK SRS1 which operates at the entity level.

SDR components include8:

• Investment labels — four optional labels (Sustainability Focus, Sustainability Improvers, Sustainability Impact, Sustainability Mixed Goals) reflecting the fund's sustainability strategy
• Naming and marketing rules from December 2024 — restrictions on use of sustainability-related terms in product names and marketing
• Pre-contractual disclosures from December 2024 — sustainability information at point of sale
• Ongoing product disclosures from December 2025 — annual product-level sustainability reporting
• Anti-greenwashing rule from May 2024 — applies to all FCA-regulated firms making sustainability claims

For UK asset managers in scope of both UK SRS1 and SDR8, consistency between the two regimes is essential. The methodology used for UK SRS Category 15 (Investments) disclosure should be the same methodology informing SDR product-level disclosures. Material divergence in disclosed figures between entity-level and product-level reports is a credibility risk and may attract regulatory scrutiny.

GFANZ alliances and voluntary commitments

Many UK financial institutions have made voluntary net-zero commitments through Glasgow Financial Alliance for Net Zero (GFANZ) sector-specific alliances4. The current major alliances are:

• Net Zero Banking Alliance (NZBA) [9] — UN-convened, 140+ banks committed to aligning lending and investment activities with net-zero emissions by 2050
• Net Zero Asset Managers Initiative (NZAMI) [10] — 320+ asset managers committed to supporting net-zero by 2050 across managed assets
• Net Zero Asset Owner Alliance (NZAOA) — 80+ asset owners with similar commitments
• Net Zero Insurance Alliance (NZIA) — fragmented following 2023 antitrust concerns; insurers now pursuing individual commitments

UK SRS1 does not require companies to make net-zero commitments — but where a company has set climate-related targets, UK SRS S2 paragraphs 33-361 require disclosure of those targets including methodology, baseline, milestones, and alignment with international agreement. FIs that have made GFANZ commitments must therefore disclose them within UK SRS, including progress against the commitments.

This creates an accountability layer that goes beyond the voluntary nature of the original commitment. An FI that committed to NZBA9 targets in 2021 cannot quietly walk back the commitment — UK SRS1 disclosure obligations apply to whatever targets are publicly stated.

NZBA updated its guidance in 2024 with some methodology relaxations9, reflecting practical implementation challenges. UK FIs should align UK SRS target disclosures with current alliance guidance, with clear methodology disclosure under paragraph 351.

Transition plans for FIs

UK SRS S21 takes a disclose-or-explain approach to transition plans — companies are not required to produce a plan, but must disclose whether one exists, where it can be found, and key assumptions per paragraph 14(a)(iii)1. For financial institutions, transition plan disclosure is operationally significant because of the size and complexity of decarbonisation pathways for diversified portfolios.

The IFRS Foundation transition plan materials14 (formerly the TPT Disclosure Framework before TPT was wound up in 2024) include sector-specific guidance for banks, asset managers, and insurance. The GFANZ Recommendations4 provide more detailed financial sector transition plan guidance covering financed emissions reduction, real-economy transition financing, and engagement strategies.

For UK FIs producing transition plans, the typical structure covers:

• Portfolio-level decarbonisation pathway aligned with stated commitments (NZBA, NZAMI, etc.)
• Sectoral pathways for high-emitting industries (energy, transportation, materials, real estate)
• Engagement strategy for material investee companies and counterparties
• Real-economy transition financing commitments (green finance, transition finance, sustainability-linked finance)
• Methodology for measuring progress against targets
• Governance arrangements for oversight and accountability

Where UK FIs have aligned with the SBTi Financial Sector Net-Zero Standard15, transition plan disclosures reference the SBTi methodology. SBTi validation is not required under UK SRS1 but is widely cited as external validation of target ambition.

Stewardship and engagement

UK asset managers and asset owners are subject to the UK Stewardship Code 202011, a voluntary code with signatory status managed by the FRC. The Code applies on an "apply and explain" basis — signatories report annually against twelve principles, with the FRC assessing reports against quality criteria.

Principle 7 of the Stewardship Code11 requires signatories to systematically integrate stewardship and investment, including material environmental, social, and governance issues. Climate engagement has become central to stewardship reporting — engagement with investee companies on climate strategy, targets, transition plans, and disclosure quality.

For UK SRS1 reporting purposes, stewardship and engagement activities can be disclosed within the Strategy pillar (paragraphs 8-231) and as part of transition plan disclosures (where applicable). Engagement-led decarbonisation strategies — alternative to divestment — are increasingly common and require disclosure of engagement methodology, escalation processes, and outcomes.

Frequently asked questions