Overview of SDR
Introduced: Policy commitment in 2024 under the UK Green Finance Strategy
Effective from: TBD (subject to FCA rule-making process)
Last modified: Q1 2025 (FRC endorsement of IFRS S1 & S2 announced)
Region(s): United Kingdom
About SDR
The UK’s Sustainability Disclosure Requirements (SDR) represent the UK’s future unified framework for sustainability reporting, aimed at enhancing transparency, preventing greenwashing, and aligning financial reporting with climate and broader ESG objectives.
In 2025, the Financial Reporting Council (FRC) officially endorsed the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards, laying the groundwork for regulatory implementation via the Financial Conduct Authority (FCA).
Once in force, SDR will require UK-listed and FCA-regulated entities to publish annual, investor-grade sustainability disclosures that are consistent, comparable, and aligned with international frameworks like TCFD and ISSB.
Criteria for compliance
The SDR applies to all premium-listed companies on the London Stock Exchange, large asset managers and institutional investors under FCA supervision, and other FCA-regulated firms, including financial advisers, pension providers, and investment product distributors, subject to forthcoming rules
Compliance timelines
Q1 2025
FRC endorses IFRS S1 & S2
2025
FCA to draft and consult on rules throughout the year
FY 2026 (anticipated)
First mandatory reporting period
2027
First reports published, subject to confirmation of rule-making timelines
Disclosure requirements
Once the rules are finalized, covered entities will need to report in line with IFRS S1 (General Requirements) and IFRS S2 (Climate Disclosures), including:
IFRS S1 – General sustainability disclosures
- Governance, strategy, and risk management of sustainability-related risks and opportunities
- Material sustainability topics across environmental, social, and governance domains
- Key metrics and targets used to monitor performance
IFRS S2 – Climate-related disclosures
- Scope 1 and Scope 2 GHG emissions (mandatory)
- Material Scope 3 emissions (where relevant)
- Climate-related risks and opportunities, including transition plans and scenario analysis
- Alignment with TCFD structure
Disclosures must be provided as part of a company’s annual report and will need to be accessible to investors and the public.
Third-party assurance
There is no formal assurance mandate yet; the FCA is expected to consult on whether limited or reasonable assurance will be required. Entities are encouraged to prepare for assurance by strengthening internal controls and reporting systems in advance of formal rules.
Penalties for non-compliance
Once SDR rules are in effect, the FCA will have enforcement powers, including:
- Financial penalties for misreporting or failure to disclose
- Public censure statements
- Suspension or restriction of regulated activities in cases of material noncompliance
- Continued enforcement of the anti-greenwashing rule, which already applies to all FCA-regulated firms as of 2024
