ESG Market Alert UK – October 2025

FCA review highlights progress and complexity in climate disclosures

The Financial Conduct Authority (FCA) has published findings from its multi-firm review of how asset managers, life insurers, and FCA-regulated pension providers are complying with its climate disclosure rules. Introduced in 2021 and aligned with the Taskforce on Climate-related Financial Disclosures (TCFD), these climate disclosure rules form part of the UK’s broader Sustainability Disclosure Requirements (SDR) framework.

The review found that firms have made meaningful progress in integrating climate risk into governance, strategy, and reporting. However, it also identified areas where disclosures remain overly complex or inconsistent – particularly at the product level.

Key findings include:

• Risk management: Firms are increasingly treating climate change as a material financial risk, with improved internal capabilities and integration into client reporting.
• Audience mismatch: While disclosures are generally useful for institutional investors, they are often too technical for retail audiences, limiting engagement.
• Accessibility: Entity-level reports are typically easy to locate, but product-level disclosures are harder to find, reducing transparency for end users.
• Data challenges: Firms are more comfortable reporting historical emissions data but struggle with forward-looking scenario analysis. Only around half of product reports included all three required climate scenarios.
• Proportionality concerns: Asset managers in particular view the current rules as overly detailed and duplicative, given overlapping global disclosure regimes.
• Regulatory clarity: Firms are seeking guidance on how TCFD requirements will evolve in light of the International Sustainability Standards Board standards and are calling for greater international alignment.

Looking ahead, the FCA has signalled three key priorities:

• Simplification: streamlining disclosure requirements to reduce duplication and improve efficiency across TCFD and SDR frameworks.
• Improved decision-usefulness: ensuring disclosures are clear, comparable, and support better client outcomes, while addressing greenwashing risks.
• Global alignment: incorporating ISSB standards and promoting international consistency to maintain the UK’s leadership in sustainable finance.

The FCA has committed to continued industry engagement, but firms should prepare for rising expectations around the quality, clarity, and comparability of climate-related disclosures. In response, firms should prioritise simplifying product-level disclosures, enhancing scenario analysis, and aligning with emerging ISSB standards to meet evolving regulatory expectations.

U.S.–UK nuclear energy accord announced

On 30 September, the UK and U.S. governments unveiled the Atlantic Partnership for Advanced Nuclear Energy – a bilateral initiative to accelerate the deployment of nuclear technologies. The agreement introduces a mutual recognition framework for reactor approvals, allowing designs cleared in one country to be fast-tracked in the other. This could reduce licensing timelines from three to four years to around two, significantly speeding up project delivery.

The accord supports a series of commercial partnerships between UK and U.S. firms focused on next-generation nuclear technologies. Notably, X-Energy and Centrica announced a joint venture to develop up to 12 advanced modular reactors (AMRs) in Hartlepool.

The partnership reinforces the UK government’s ambition to become a clean energy superpower, positioning nuclear as a cornerstone of energy security and industrial decarbonisation.

For UK businesses, the accord signals a shift toward regulatory reform and increased investor confidence in the nuclear sector, opening the door to faster project approvals and cross-border collaboration. Energy-intensive industries stand to benefit from more reliable access to low-carbon power, while firms across the supply chain may find new opportunities in advanced reactor development, infrastructure, and clean energy innovation.

See our latest article on this topic here.

UK offshore wind reboot: CfD reforms and supply chain incentives

Ahead of Allocation Round 7 (AR7), the UK government has announced a significant reset of offshore wind investment conditions. Key changes include:

• Contract for Difference (CfD) term extended from 15 to 20 years for offshore wind (fixed and floating), onshore wind, and solar;
• Strike price caps increased to £113/MWh (fixed-bottom) and £271/MWh (floating offshore wind);
• A new £544 million Clean Industry Bonus (CIB) to incentivise UK supply chain investment.

The reforms follow a mixed track record: AR5 (2023) saw no offshore wind bids, while AR6 (2024) secured ~5.3 GW. Government and industry now target ~12 GW across AR7 and AR8 to remain on track for the UK’s 43–50 GW offshore wind target by 2030.

The longer CfD term is expected to reduce the weighted average cost of capital (WACC), improving bid competitiveness. Higher strike price caps reflect inflationary and supply chain pressures, while the CIB complements broader industrial support measures, including GB Energy’s £1 billion supply chain initiative and National Grid’s ~£35 billion RIIO-T3 investment plan.

However, critical enablers remain unresolved. Grid connection reform – via NESO and Ofgem’s queue overhaul and a temporary pause on new applications – and planning streamlining under the Planning & Infrastructure Bill are essential to unlocking delivery at scale.

EFRAG launches cost-benefit analysis of simplified ESRS

The European Financial Reporting Advisory Group (EFRAG) has initiated a cost-benefit analysis of proposed simplified European Sustainability Reporting Standards (ESRS), part of the EU’s broader effort to streamline sustainability disclosures under the Corporate Sustainability Reporting Directive (CSRD).

While the UK is no longer subject to EU regulations post-Brexit, many British companies with operations in the EU or listed on European exchanges may still fall within the scope of CSRD. As such, developments in EU sustainability reporting remain highly relevant for UK-based firms with cross-border activities.

The proposed changes aim to reduce complexity and compliance burdens while maintaining alignment with the EU’s climate goals, including the 2050 net-zero target under the European Green Deal. Key simplifications include refining the double materiality assessment, removing voluntary disclosures, clarifying terminology and structure, and reducing redundancies across standards.

EFRAG’s analysis commenced in July and will run to December 2025, with stakeholder input having been gathered via an online survey in August and September. Final technical advice is expected to be submitted to the European Commission by 30 November 2025.

UK companies with EU reporting obligations, or those aligning voluntarily with EU standards, should monitor these developments closely. The outcome could significantly shape future sustainability reporting frameworks and influence how British companies prepare for compliance and investor expectations across Europe.

See our latest article on this topic here

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Authored by Nicola Evans, Rita Hunter, Scott Prior, Aled Luckman, Max Duckworth, Gareth Effiom, Julien Kress, Archie Ragupathy, Audrey Tan, and Serkan Yavuz.