The UK government will create UK Sustainability Disclosure Standards (SDS), which will allow businesses to disclose on sustainability and climate-related risks.
The UK SDS will be established on principles recently published by the ISSB, taking motivation from sustainability and climate-related reporting norms issued by the IFRS Foundation’s International Sustainability Standards Board (ISSB).
The ISSB was established with the aim of creating IFRS Sustainability Disclosure Standards to serve as a global benchmark for consistently assessing risks and possibilities related to sustainability for businesses. It was introduced during the UK-hosted COP26 climate summit in November 2021.
The newly proposed IFRS standards were made available to the public in June 2023, and the International Organization of Securities Commissions (IOSCO) advised regulators to incorporate them into their regulatory frameworks for sustainability reporting the following month.
To ensure cross-border comparability and investor utility, the DBT emphasized the significance of bringing the UK SDS into compliance with IFRS standards. If a departure from the international baseline is deemed necessary for UK-specific issues, it will only take place.
The government’s goal was made clear in the announcement, which read: “By utilizing IFRS Sustainability Disclosure Standards as a the starting point, the intention is for the data that corporations report through UK SDS to be comparable worldwide and decision-useful for investors.
These standards’ disclosure requirements will make it easier for investors to evaluate information about different businesses and make decisions, thereby promoting efficient capital allocation and the smooth operation of the UK capital markets.
This program is a continuation of the UK’s Green Finance Strategy Update, that also included a review of the newly released IFRS sustainability criteria. The United Kingdom’s government as well as the Financial Conduct Authority, also known as the FCA, will decide separately on disclosure requirements, according to the DBT.
With this change, the UK keeps taking the lead in terms of obligations for large firms to report on climate-related issues. According to the DBT, by July 2024, the Office of the Secretary of State for Business and Trade will be deciding whether to officially establish the UK SDS by endorsing the International Framework for Sustainability Disclosure Standards.