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  • UK SRS Comply or Explain: Writing a Defensible Explanation

    UK SRS Comply or Explain: Writing a Defensible Explanation

    Finance director reviewing UK SRS comply or explain disclosures with the board

    On 30 September 2026 the Financial Conduct Authority published PS26/19, its final rules bringing UK SRS into the listing rules. The consultation had proposed making UK SRS S2, the climate standard, mandatory. The final rules apply comply or explain across the whole framework, climate included.

    It is tempting to read that as a reprieve. For a finance director it is better read as a change in the kind of work. Every gap you choose to explain becomes a published statement, with reasons and a plan, sitting in the annual financial report next to your audited numbers. This post sets out what the final rules require and how to decide, line by line, what to comply with in year one.

    What PS26/19 confirms

    • Start date: accounting periods beginning on or after 1 January 2027, with first reports in 2028. For a calendar-year company, that is under three months away.
    • Basis: comply or explain across UK SRS S1 and S2, including Scope 3. The FCA says this brings S2 into line with what it consulted on for S1 and Scope 3.
    • Who: issuers in five listing categories: commercial companies (UKLR 6), international commercial companies with a secondary listing (UKLR 14), depositary receipts (UKLR 15), non-equity and non-voting equity shares (UKLR 16) and the transition category (UKLR 22). Secondary listing and depositary receipt issuers now report against UK SRS themselves, where the consultation had only asked them to signpost home-country disclosures. Closed-ended funds, shell companies and debt issuers stay out.
    • Transition plans: no company is required to produce one, and no location is prescribed. The rules focus on transparency about whether a plan exists and where to find it.
    • Assurance: still voluntary. A company that obtains it must disclose the provider, the scope, the level (limited or reasonable), the standards used and where the report can be found. No explanation is needed if you have none.

    The headcount of companies in scope has moved with the wider categories, so treat older estimates with care until the FCA’s updated figures settle. Our August overview of UK SRS S1 and S2 was written before the rules were final and now carries an update note.

    The two reliefs, and the line you must write if you use them

    The FCA kept both transitional reliefs it consulted on:

    • Scope 3: no disclosure required for one year from initial application.
    • UK SRS S1 (non-climate): no disclosure required for two years from initial application, which the FCA calls “climate-first” reporting.

    For a calendar-year company, that means S2 without Scope 3 for FY2027, Scope 3 joining for FY2028, and S1 in full from FY2029, all on comply or explain. The final UK SRS also keep a one-year relief allowing an existing greenhouse gas measurement method to continue, and relief from comparatives in the first year.

    Using a relief has one condition. You must state that you are using it in the annual financial report. You do not have to explain why, because using a relief does not engage the explain rules. It is a single sentence, and an easy one to forget.

    What an “explain” actually has to contain

    This is the part most summaries skip. The rule text (UKLR 6.6.6R in the instrument appended to PS26/19) sets out what a company must include when it does not disclose in line with S2, or does so only in part:

    1. a summary of the S2 requirements that have not been met;
    2. the reasons for not making those disclosures; and
    3. any steps the company is taking, or plans to take, to make those disclosures in future.

    The S1 version is tied to the sustainability risks and opportunities the company has identified. If it has identified none, it must say so.

    Read as a finance director, that is a three-part disclosure with a forward commitment attached. Next year’s report will be read against this year’s stated steps, so an explanation creates a promise you will be measured on. The FCA also reminds issuers of their duty under DTR 4.1.8R to disclose principal risks and uncertainties. If climate is on your principal risks list, explaining away the S2 disclosures that describe it will be hard to defend.

    The detail is still moving. The FCA is consulting on Technical Note 803.1 in Primary Market Bulletin 66, covering how much detail to give, worked examples, and how comply or explain interacts with the UK SRS statement of compliance. Feedback closes on 28 October 2026, with a webinar on 19 October, and the FCA aims to finalise the guidance before the rules take effect. Until then, treat any explanation template you are offered as provisional.

    Deciding what to comply with in year one

    The useful question for each requirement is whether you can produce a number that survives scrutiny. A weak figure published as compliance is a worse outcome than a clear explanation with a dated plan.

    Comply where finance can already evidence it

    • Scope 1 and 2 emissions. UK-incorporated quoted companies already report these under SECR. The data, the method and the sign-off route exist, and explaining them away would read as a controls weakness.
    • Governance and risk management. These follow the TCFD pillars most listed companies have reported against since 2021 or 2022.
    • Anything already in your principal risks. If the board has said it matters, the disclosure should follow.

    Explain where an honest explanation beats a weak number

    • Industry-based metrics you have never collected and cannot evidence for FY2027.
    • Quantified financial effects of climate risks where the modelling would not survive review.
    • Scope 3 from FY2028, for categories where supplier data is still a spend-based estimate you cannot yet improve. Label the estimate, or explain and commit to a date.

    Four questions for every line

    • Can we trace this figure to a source document and reproduce it?
    • Has someone other than the preparer reviewed it?
    • Does it relate to a principal risk the board has already disclosed?
    • If we explain, what is the step, who owns it and by when?

    The first two are the same tests an assurance practitioner applies, which we set out in what audit-ready ESG reporting actually means.

    Assurance just became visible to investors

    The FCA declined to name ISSA (UK) 5000, but it did require you to disclose whichever standard you used. From 2028, investors will be able to see side by side who assured whose figures, at what level and on what scope. The FCA is keeping mandatory assurance under review.

    If you plan to obtain assurance on FY2027 figures, ISSA 5000 applies to engagements covering periods beginning on or after 15 December 2026. Our guide to what ISSA 5000 changes covers what a practitioner will ask to see.

    Where to start this quarter

    Map each S1 and S2 requirement to one of three outcomes: comply, relief, or explain. Record the reason and owner for each, and draft the explanations now while the TN 803.1 consultation is open. The register you build is your first-year disclosure plan, and the steps column becomes next year’s checklist.

    Horizon ESG for finance teams holds that register alongside the data itself: every figure traced to source, every change logged, and each explanation’s stated steps tracked to completion. The UK SRS reporting page shows how the S1 and S2 requirements map in the platform. Much of the Scope 3 work will land on your sustainability team through supplier requests, and our page for sustainability teams covers that side.

    If you want to test a draft explanation against your own data, book a short demo and we will walk through it with you.

    Sources: FCA PS26/19, “Aligning listed issuers’ sustainability disclosures with international standards”, 30 September 2026 (paras 1.2, 1.7, 1.9, 1.11, 3.6-3.7, 3.14-3.24, responses on transition plans and assurance, and UKLR 6.6.6R in the appended instrument); FCA Primary Market Bulletin 66. Checked 6 October 2026.

  • UK SRS S1 and S2: Who Has to Report, and When

    Update, 6 October 2026: the FCA published its final rules in PS26/19 on 30 September 2026. They apply comply or explain across all of UK SRS, including S2 climate disclosures, which the consultation had proposed to make mandatory. The dates below (periods from 1 January 2027, Scope 3 relief for one year, S1 relief for two years) are confirmed. Read what the final rules require and how to write a defensible explanation.

    The UK’s sustainability reporting standards have been finished for six months and almost nobody has started. That is not negligence, it is a rational response to an unfinished sentence: the standards exist, but the rule that makes them binding does not. It is expected this autumn.

    Which makes now the useful moment to understand them, rather than the moment after the announcement when every consultant in London is quoting you a readiness assessment.

    Where things actually stand

    The Department for Business and Trade published the final UK SRS S1 and UK SRS S2 on 25 February 2026. They are available for voluntary use by any entity today, and a handful of companies have already adopted them early.

    The binding step sits with the Financial Conduct Authority. Its consultation, CP26/5, ran from 30 January to 20 March 2026 and proposed replacing the current TCFD-aligned listing rules with UK SRS. The FCA has said it aims to publish the final Policy Statement in autumn 2026. As of today it has not.

    Everything below the standards themselves is therefore still a proposal. It is a well-signalled proposal that has already been through consultation, which is not the same thing as a rule.

    The distinction that matters most: this is ISSB, not ESRS

    If your team spent 2024 and 2025 building for CSRD, the single most important thing to understand about UK SRS is that it did not come from the same place.

    UK SRS S1 and S2 are endorsed versions of IFRS S1 and IFRS S2, the ISSB standards, with only limited UK amendments. They are not derived from the ESRS. The practical consequences are real:

    • Materiality is single, not double. ISSB asks what could reasonably be expected to affect an entity’s prospects – cash flows, access to finance, cost of capital. It does not ask you to report impacts on people and planet that are not financially material. Your CSRD double materiality assessment is useful input, but it is not the same assessment.
    • The audience is investors, explicitly and narrowly. That changes the register of the disclosure and often the level of aggregation.
    • There is no ESRS datapoint list to work through. ISSB is principles-based with industry-specific metrics drawn from SASB. Teams used to filling in a defined set of datapoints find this harder, not easier, because judgement is now load-bearing.

    The overlap is nonetheless substantial at the data layer. Emissions are emissions; governance narrative is largely reusable; scenario analysis carries over. It is the framing, materiality boundary and reporting location that differ. We covered the mechanics of that mapping in more detail in our piece on how TCFD and CSRD requirements line up for UK companies.

    Who is in scope

    The FCA’s proposals apply to listed issuers in five UK Listing Rules categories: commercial companies (UKLR 6), secondary listings (UKLR 14), depositary receipts (UKLR 15), non-equity and non-voting equity shares (UKLR 16), and the transition category (UKLR 22).

    That is roughly 515 companies. For context, post-Omnibus CSRD now catches around 5,000 companies across the entire EU, so neither regime is the mass-market obligation the 2023 architecture implied.

    If you are a private UK company, you are not in the FCA’s population. You may still receive UK SRS-shaped questions from listed customers and from lenders, which is a different problem with the same answer.

    The timetable, as proposed

    • UK SRS S2 (climate): accounting periods beginning on or after 1 January 2027. For a December year end, that means the report published in 2028.
    • Scope 3 emissions: a one-year transitional relief, applying on a comply-or-explain basis for periods beginning on or after 1 January 2028.
    • UK SRS S1 (wider sustainability): a two-year relief, comply-or-explain for periods beginning on or after 1 January 2029.

    Read that phasing carefully, because it is the opposite of how most companies sequence their work. Climate lands first and hardest. Scope 3, the hardest data problem in the standard, gets one extra year and then arrives on comply-or-explain, which in practice means “report it or write a paragraph explaining a gap to your investors”. Neither is a reason to defer the work; both are a reason to sequence it properly.

    What happens to your TCFD disclosures

    If you have been reporting under the FCA’s TCFD-aligned rules, you are not starting from zero. IFRS S2 was built on the TCFD’s four pillars, and governance, strategy, risk management, and metrics and targets survive intact as the structure of the disclosure.

    What is genuinely new is the level of specificity:

    • Industry-based metrics. S2 points to SASB-derived metrics for your sector. TCFD left this open; S2 does not.
    • Scope 3 across all fifteen categories, with the measurement approach and inputs disclosed, rather than a partial inventory with a footnote.
    • Connectivity with the financial statements. The assumptions behind your climate disclosure are expected to be consistent with the ones behind your accounts. Asset lives are the classic exposure.
    • Transition plans. The FCA is not proposing to mandate one. It is proposing that you disclose whether you have published one and where it can be found, or why you have not – which is a harder question to answer blandly than it looks.

    The assurance line most readers skipped

    CP26/5 does not mandate third-party assurance. It proposes something quieter: that in-scope companies state in the annual financial report whether they obtained assurance, from whom, over which disclosures, to what level, against which standard, and where the report sits.

    A visible blank is a disclosure in itself. Once one FTSE 250 peer names a provider and a standard, the field fills in fast. Anyone who watched limited assurance arrive in Europe will recognise the shape of it – and the preparation it demands is the same as we set out in our guide to what limited assurance actually tests: documentation, traceability and controls, not recalculated totals.

    SECR has not gone anywhere

    Worth saying plainly, because the UK SRS coverage tends to imply otherwise. Streamlined Energy and Carbon Reporting still applies to all UK quoted companies and to large unquoted companies and LLPs meeting the familiar size test. That population is an order of magnitude larger than the FCA’s 515, and nothing in UK SRS removes the obligation. If you are a large private company, SECR remains your binding UK requirement and UK SRS is, for now, context.

    What to do before the Policy Statement lands

    • Establish whether you are in one of the five UKLR categories. Ten minutes, and it determines everything else.
    • Re-run materiality on a single-materiality basis if your existing assessment was built for CSRD. Do not assume the answer transfers.
    • Baseline Scope 3 now, not in 2028. The relief is on the reporting date, not on the data collection, and purchased goods and services cannot be built in a quarter.
    • Check connectivity between your climate assumptions and the assumptions in your financial statements. Fix the inconsistencies while nobody is examining them.
    • Decide your assurance position early. If you intend to say “assured”, the provider needs to see your controls well before the reporting period, not after it.
    • Read the Policy Statement when it appears and re-check the dates. Consultation feedback moves timetables, and these are still proposals.

    The companies that will find UK SRS straightforward are not the ones with the most disclosure experience – they are the ones that can show where each number came from. Horizon ESG helps UK reporting teams collect data once and keep source, method, factor version and owner attached to every figure, so the same evidence base serves UK SRS, SECR, ISSB and customer data requests without a rebuild each cycle. If you are still choosing a platform, our comparison of eight ESG reporting platforms sets out which ones cover ISSB properly rather than treating it as a CSRD add-on. See how it works for UK reporting, or book a free demo.

  • IFRS’s New Chairs Are Supervisors, Not Accountants

    On 11 August the IFRS Foundation named the two people who will run global corporate reporting for the rest of the decade. Almost nobody in the sustainability press covered it, because governance announcements do not read like news. They are, however, one of the more reliable predictors available: personnel is policy, and the Foundation has just told you a great deal about how IFRS S1 and S2 will be interpreted, pushed and enforced.

    The short version is that the Foundation skipped the accounting bench. Neither appointee comes from technical financial reporting. Both come from financial supervision, which is a different profession with different instincts about what a disclosure is for.

    What was announced

    Steven Maijoor becomes Chair of the IFRS Foundation Trustees from 1 January 2027 on an initial three-year term, succeeding Erkki Liikanen, who has held the role since 2018. Maijoor is currently an Executive Board member and Chair of Supervision at De Nederlandsche Bank and sits on the ECB Supervisory Board. Before that he was Chair of ESMA through the period in which SFDR and the EU Taxonomy were designed.

    Sam Woods becomes Chair of the IASB from 1 October 2026 on a five-year term, succeeding Andreas Barckow, whose term ended in June. Woods was Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority.

    The two appointments complete the Foundation’s senior slate alongside Emmanuel Faber, who remains ISSB Chair to 31 December 2027, and Laura Forzani, who becomes Managing Director on 1 September 2026.

    Why a supervisor reads a disclosure differently

    A standard-setter’s core question is whether a requirement is conceptually sound and faithfully represents the underlying economics. A supervisor’s core question is narrower and more awkward: can I compare this across forty firms, and does it hold up when I ask the firm to show me where the number came from?

    That difference has consequences. Supervisors are institutionally impatient with disclosures that are technically compliant but not usable. They tend to favour prescription over judgement where judgement produces incomparable results. They ask for the underlying data, not the narrative around it. And they have spent their careers in regimes where the answer “that is our best estimate” is only acceptable if it is accompanied by a documented method, a stated limitation and a trail back to source.

    Put a former ESMA Chair over the Trustees and a former PRA chief executive over the IASB, and the reasonable expectation is that this register becomes the house style of global reporting.

    Four things this makes more likely

    1. Harder pressure on connectivity

    Connectivity, the requirement that sustainability information hangs together with the financial statements rather than sitting beside them, is already in IFRS S1. It has been unevenly applied because it is easy to satisfy in form. Supervisors are unusually good at spotting the gap between a transition plan that assumes an asset is retired in 2030 and a balance sheet that depreciates it to 2045. Expect that inconsistency to be treated as a finding rather than a presentational quirk.

    2. Assurance expectations move ahead of assurance mandates

    In most jurisdictions sustainability assurance is either limited-scope or not yet required. That will not stop the direction of travel. Supervisors do not wait for an assurance mandate to ask evidential questions; they ask them through their existing supervisory relationship, and preparers answer. If your organisation is already working through what limited assurance actually requires, that work now has a second audience beyond the auditor.

    3. Adoption gets negotiated with supervisors, not accounting bodies

    Jurisdictional adoption of ISSB standards has largely been driven through securities regulators and central banks already: the FCA in the UK, the FSA in Japan, ASIC and the AASB in Australia. Two supervisors at the top of the Foundation makes that channel the default rather than the exception. For preparers the practical read is that local implementation detail will increasingly be set by your market regulator, and that is where to watch for the rules that actually bind you.

    4. The evidence bar rises while the scope bar falls

    This is the tension worth internalising. Europe has spent eighteen months narrowing who has to report: the Omnibus cut the CSRD population, the revised ESRS reduced datapoints, and the Taxonomy is being simplified again for FY2027. It is tempting to read that as a general softening. It is not. Fewer companies are being asked to report, and those that do are being asked to prove more. Scope and rigour are moving in opposite directions, and the Foundation just staffed for rigour.

    What this does not change

    Two clarifications, because governance news invites over-reading.

    First, the technical programme is unaffected. Faber remains ISSB Chair through 2027, so the work in flight proceeds on its existing timetable: the targeted IFRS S2 amendments on greenhouse gas measurement are effective for annual periods beginning on or after 1 January 2027 with early application permitted, and the nature-related work continues as a non-mandatory IFRS Practice Statement, with an exposure draft targeted for October 2026. If you are already preparing for nature disclosure, nothing in this announcement moves that date.

    Second, neither appointment changes a single current obligation. Nobody’s filing deadline moved on 11 August. This is a signal about the next three to five years, not a compliance event.

    What a reporting team should actually do about it

    Very little that is new, and quite a lot that is usually deferred. The useful response to a rising evidence bar is not more disclosure. It is better provenance behind the disclosure you already make.

    • Attach evidence at the point of collection, not at audit. Every figure should carry its source document, method, preparer and date without anyone having to reconstruct it in February. Reconstruction is where first assurance cycles overrun.
    • Write down your estimation methods before you need to defend them. Estimates are acceptable; undocumented estimates are not. A supervisor’s objection is almost never to the estimate itself.
    • Reconcile your sustainability assumptions to your financial ones. Asset lives, impairment triggers, provisions, capex commitments. Do the comparison internally before somebody external does it for you.
    • Read your market regulator, not just the standard. If adoption is supervisor-led, the binding detail arrives in a policy statement or a consultation from the FCA, FSA, ASIC or SEC, not from the IFRS Foundation.
    • Stop treating scope relief as workload relief. If simplification has taken pressure off your reporting population, redirect that capacity into data quality rather than banking it.

    The signal underneath the announcement

    For four years the central question in sustainability reporting has been who has to report. Politically that question is closing, and the answer is fewer companies than the 2023 architecture envisaged. The question replacing it is how well, and that is a supervisory question rather than a legislative one. It gets answered slowly, through examinations and findings and comparability reviews, and it does not respond to lobbying in the way scope thresholds do.

    The teams that will find the next few years comfortable are not the ones with the most disclosure. They are the ones that can answer “where did this number come from” in minutes rather than weeks.

    If your emissions and ESRS data live across spreadsheets, inboxes and a consultant’s model, the evidence trail is the thing you do not have. Horizon ESG helps reporting teams collect data once, keep source, method and owner attached to every figure, and report it against CSRD, ISSB and California requirements without rebuilding the inventory each cycle. Book a free demo.

  • Data Centres Just Became an ESG Disclosure Risk

    On 14 July 2026, New York became the first US state to slam the brakes on data centre construction. Governor Kathy Hochul signed an executive order barring the Department of Environmental Conservation from issuing discretionary permits for new data centres above 50 MW of power demand for up to a year, while regulators write comprehensive standards from scratch. The trade press read it as an energy-and-AI story. For sustainability teams, it is something else entirely: the moment data centre energy stopped being a line in your Scope 2 footnote and became a strategic disclosure risk your climate reporting has to describe.

    If your business runs a material digital estate — and in 2026 most do — this is the clearest signal yet that compute energy is moving from an efficiency talking point to a permitting, siting, and transition-risk question. The reporting frameworks you already comply with anticipated this. Most disclosures have not caught up.

    What New York actually did

    The order does not ban data centres. It pauses discretionary environmental permitting for the largest facilities — those drawing more than 50 MW, roughly the scale of a hyperscale or large colocation site — for up to twelve months while the state builds a standing regulatory regime. The stated concern is straightforward: surging AI and cloud demand is loading the grid faster than New York can plan for, and the existing permitting process was never designed to weigh that.

    The specifics matter less than the precedent. A US state has now formally treated large-scale compute as an environmental externality worth constraining. That is exactly the kind of policy shift that climate-risk frameworks classify as a transition risk — a change in the regulatory environment that alters the cost, feasibility, or location of your operations. And New York is unlikely to be the last mover; when one jurisdiction sets a template, disclosure-conscious investors start asking every data-centre-intensive issuer the same questions.

    Why this is a disclosure problem, not just an energy one

    Here is the disconnect. Most companies account for data centre electricity as a Scope 2 emissions figure — a number to be measured, reduced, and reported. That framing is correct but incomplete. It captures what your compute emitted last year. It says nothing about whether you can build, power, or expand that compute next year.

    From Scope 2 line item to transition risk

    A permitting moratorium changes the calculus. If a company’s growth assumes new data centre capacity in a jurisdiction that has just paused approvals, that assumption now carries policy risk — potential delay, higher cost, or forced relocation. Under a climate-risk lens, that is a material forward-looking exposure, not a historical emissions total. The same logic extends to grid connection queues, rising industrial power prices, and local opposition, all of which are tightening in the markets where compute demand is highest.

    The physical-risk angle teams forget

    Transition risk is only half the picture. Large data centres are also water-intensive — cooling can consume millions of litres a year — and they concentrate that demand in specific locations. That exposes them to physical climate risk: drought, heat stress, and water-access restrictions that can throttle operations regardless of how clean the power is. A disclosure that reports Scope 2 emissions but ignores where the facilities sit and what they depend on is telling investors half a story.

    What ISSB S2 and ESRS E1 already require

    None of this requires a new rule. The two frameworks most reporters are already inside — IFRS S2 from the ISSB, and ESRS E1 under the CSRD — both demand exactly the forward-looking narrative that data centre exposure calls for.

    • IFRS S2 requires disclosure of the climate-related risks and opportunities that could reasonably affect your prospects, split into transition and physical risk, plus how they feed strategy, financial planning, and resilience under different scenarios. A permitting-constrained compute footprint is a textbook example of what S2 expects you to surface.
    • ESRS E1 requires a transition plan, disclosure of material physical and transition risks, and reporting of energy consumption and mix alongside gross Scopes 1, 2, and 3. The connective tissue between your energy dependency and your strategic resilience is precisely what E1’s risk disclosures are for.

    In other words, the standards already ask the question. New York just made it concrete. For teams still treating climate risk and carbon accounting as separate exercises, this is the argument for joining them up — a theme we explored in our look at how TCFD and CSRD climate disclosure align.

    What a defensible disclosure looks like

    Most current data centre disclosure is boilerplate: an efficiency metric, a PUE figure, maybe a renewable-energy commitment. That is not what a climate-risk framework is asking for. A disclosure that would survive scrutiny does four things:

    • Locates the exposure. Identify where your material compute capacity sits — owned, colocated, or cloud — and flag jurisdictions where permitting, grid access, or water stress is tightening. Generic group-level statements are not enough.
    • Connects energy to strategy. Explain how future capacity needs interact with transition risk. If growth depends on new facilities, say what a permitting delay would mean for the plan.
    • Treats water as a risk, not a footnote. Disclose cooling water dependency in high-stress locations as a physical risk with operational consequences, not just a sustainability metric.
    • Quantifies where it can. Move from “we are committed to efficiency” to ranges, timelines, and scenario-tested impacts. Frameworks reward specificity and penalise vagueness.

    The reporting teams that get ahead of this will not be the ones with the lowest emissions. They will be the ones who can show investors they understand where their digital infrastructure is exposed — and have a credible plan for it. Reliable, location-aware energy and emissions data is the foundation for that; measuring your Scope 1, 2 and 3 footprint accurately is the first step, but connecting it to forward-looking risk is what turns a number into a disclosure.

    Turning compute energy into an audit-ready climate disclosure starts with data you can trust. Horizon ESG helps reporting teams link emissions, energy, and transition-risk narrative in one place — so when the next New York arrives, your disclosure is already ready. Book a free demo to see how.

  • Nature Disclosure Is Coming: Get TNFD-Ready by October

    Climate has dominated sustainability disclosure for a decade. Nature is next, and the timetable is now firm. During its June 2026 conference, the IFRS Foundation confirmed that the International Sustainability Standards Board (ISSB) will publish its nature-related disclosure proposals as an exposure draft in October 2026, timed to land ahead of the year’s biodiversity COP. For reporting teams that have spent two years building climate data pipelines, this is the signal to start scoping the next frontier before it becomes mandatory.

    The proposals will take the form of an IFRS Practice Statement rather than a new standalone standard, a route the ISSB agreed in April 2026. That structural choice matters, and it draws heavily on a framework many sustainability teams already recognise: the Taskforce on Nature-related Financial Disclosures (TNFD). Here is what is coming, why it consolidates TNFD as the global baseline, and the practical groundwork worth doing now.

    What the ISSB actually announced

    The October exposure draft will not be a tenth topical standard sitting alongside IFRS S1 and S2. Instead, it will be an IFRS Practice Statement — guidance that helps companies apply the existing ISSB standards, together with the SASB Standards, to nature-related topics. In plain terms, it explains how to surface material nature information using the machinery investors already understand, rather than asking preparers to learn an entirely separate rulebook.

    The scope spans the nature topics that most often drive financial risk: land use, water, pollution, resource use, and biodiversity. These are the areas where dependencies on natural systems — reliable water, healthy soil, stable ecosystems — and impacts on them can translate into cost, disruption, or lost access to markets and finance. And crucially, the ISSB has confirmed the proposals will draw directly on the TNFD framework, giving early TNFD adopters a genuine head start.

    One point deserves emphasis: an exposure draft is a consultation, not a final requirement. The October text will open a comment window before anything is finalised. That is time to prepare, not a reason to wait.

    Why TNFD is becoming the baseline

    TNFD published its final recommendations in September 2023, deliberately mirroring the four-pillar structure — Governance, Strategy, Risk and Impact Management, and Metrics and Targets — that the market already knew from the Task Force on Climate-related Financial Disclosures. That familiarity was the point. Anyone who has produced climate disclosure recognises the shape of a TNFD report immediately.

    The ISSB’s decision to build its nature guidance on TNFD follows the same path climate took. The TCFD recommendations were absorbed into IFRS S2 and the TCFD itself wound down, with its monitoring role passing to the IFRS Foundation. Nature is now travelling that route: a voluntary framework maturing into the reference point for a global, investor-focused standard. For preparers, that convergence is good news — it means the effort you put into TNFD-aligned work is unlikely to be wasted when the ISSB text lands.

    It also connects to obligations some companies already face. Under the CSRD, ESRS E4 requires disclosure on biodiversity and ecosystems where material, so EU-scope reporters are not starting from zero. If you are still mapping what “material” means across environmental and social topics, our guide to double materiality under CSRD is a useful companion, because nature dependencies and impacts sit squarely inside that assessment.

    What nature disclosure asks of you

    Nature reporting differs from climate reporting in one important respect. Greenhouse gases are broadly comparable wherever they are emitted, so a tonne of CO2e is a tonne of CO2e. Nature is local: the same activity can be immaterial at one site and severe at another, depending on the ecosystem around it. That is why TNFD frames the work through its LEAP approach — Locate, Evaluate, Assess, Prepare — which pushes teams to start from where they operate and interface with nature.

    • Locate your interface with nature — the sites, assets, and supply-chain nodes that sit in or near sensitive ecosystems and water-stressed areas.
    • Evaluate your dependencies and impacts at those locations, from water abstraction to land-use change.
    • Assess the resulting risks and opportunities in financial terms your board and investors can act on.
    • Prepare to respond and report, aligning the output with the four disclosure pillars.

    The practical implication is that location-level data — not just enterprise totals — becomes the raw material of a credible nature disclosure. Teams used to reporting a single group emissions figure will need to think at the level of individual sites and suppliers.

    How to get TNFD-ready before October

    You do not need to wait for the exposure draft to make progress. A focused scoping exercise now will make the eventual reporting far less painful:

    • Run a first-pass location screen. Map your operational sites and material suppliers against water stress and biodiversity-sensitivity data to see where nature risk concentrates.
    • Reuse your climate governance. The board oversight and risk processes you built for climate extend naturally to nature; you are adding a topic, not rebuilding the structure.
    • Fold nature into your materiality assessment. Treat dependencies and impacts on nature as candidate material topics in your next review rather than a separate, bolt-on exercise.
    • Audit your data foundations. Location-level, supplier-level detail is harder to assemble than a single carbon figure. Knowing where those gaps are now is worth more than a polished narrative later.
    • Track the convergence. Watch how the ISSB draft aligns with TNFD and ESRS E4 so you build once and disclose against several frameworks.

    Because the ISSB is building on structures the market already uses, the teams that stay closest to their climate disciplines will adapt fastest. If your climate reporting still leans on TCFD-era foundations, our explainer on how TCFD and CSRD align is a helpful reference point for understanding how these frameworks fit together.

    The bottom line

    Nature disclosure is following the same trajectory climate did: a voluntary framework, growing adoption, then absorption into the ISSB baseline. The October exposure draft is the moment that trajectory becomes concrete. Companies that begin locating their nature interface and tightening their data now will meet it as a manageable extension of existing work — not a standing start.

    Horizon ESG is an audit-ready ESG reporting platform that helps reporting teams manage climate, CSRD, and emerging nature requirements in one place, so location-level and supplier data feed straight into disclosure rather than living in scattered spreadsheets. Book a short demo to see how we can help you get ahead of the ISSB timeline with clarity.

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