This week Maxwell Data and Brunel University of London sent a joint response to the FCA's draft Technical Note 803.1. The note explains how listed companies should comply with, or explain against, the new UK Sustainability Reporting Standards from January 2027. Our message is simple: before a company can comply or explain, it has to know which sustainability issues actually matter to its prospects. Today, most companies decide that by asking people what they think.
The question underneath every disclosure
UK SRS S1 asks companies to disclose sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital. Everything in the FCA's note rests on that list: the disclosures, the explanations of what has been left out, and even the one-line statement that a company has found no relevant risks at all.
Yet the draft note says nothing about how the list should be built. That silence leaves the field to current practice.
The trouble with interviews
Most materiality assessments are built from stakeholder interviews, surveys and management workshops. They are useful conversations. They are not evidence of financial effect. In our response we set out four problems:
Subjective. Change the interviewees or the facilitator and you change the answer.
Partial. Small, management-selected samples favour the issues already on the agenda. The risks the market sees but management doesn't are the ones most likely to be missed.
Unprovable. A ranking of opinions cannot show an investor, assurer or regulator why a topic was included or left out.
Static. Assessments are often refreshed every two or three years, while market attention can shift in months.
This matters for comply-or-explain. If identification is incomplete, an explanation of what hasn't been disclosed is incomplete too, and nobody can tell.
What evidence looks like
Our three-body approach starts from what investors actually do. We take external sentiment on each SASB sustainability topic, from news, financial and trade media, and measure how it moves with a company's weekly share price. We separate the company (the Earth) from its peer group (the Moon) and its benchmark index (the Sun). Topics with no measurable link drop to zero. What remains is a short, evidence-based list of active drivers, each with a direction showing risk or opportunity.
Our summer proof-of-concepts across 31 listed companies were instructive. Roughly 42% of weekly return variation was specific to the individual entity, 32% to industry and 26% to benchmark. Supply-chain management, physical climate impacts and customer privacy recurred as company-level drivers. Where company sentiment diverged from its peer group, this gave an early warning that an annual interview cycle would not catch. Most importantly, the proof-of-concepts gave reporters, assurers and investors enough confidence to move to Beta pilots of the approach.
We are clear about the limits. The model measures association, not causation, and sentiment about emissions is not a measurement of emissions. But UK SRS asks what could reasonably be expected to affect prospects. Measured market evidence is a far stronger basis for that judgement than opinion. Management judgement still matters: it interprets the signals and adds risks the data cannot see.
What we asked the FCA to do
We kept our proposals short, principles-based and method-neutral. None of them requires our data or anyone else's.
Remind issuers that identification must use reasonable and supportable information, including external and market data, rather than stakeholder opinion alone.
Treat the identification process as a significant judgement and ask companies to describe it briefly.
Expect a "no risks identified" statement to come with a short account of the process and evidence behind it.
Add "evidence-based" to the FCA's key features of a good explanation, alongside clear, concise, cogent and issuer-specific.
Update the FCA's illustrative examples to show what an evidence-based process looks like, in a sentence or two.
Proportionality should govern how much a company writes about its process, not whether that process rests on evidence. A small issuer can describe an evidence-based approach in two sentences.
What comes next
The FCA's consultation closes on 28 October, and final guidance should follow before the first UK SRS reporting periods begin in January 2027. Meanwhile we are moving from proof-of-concepts to Beta pilots with reporters, assurers and investors.
If you would like to join a pilot, or see what the evidence says about your own company, get in touch for a free three-body materiality report.