UK Finalises Transition Plan Taskforce Disclosures Framework

Harmonisation and interoperability key to transition plans being consistent, comparable and effective internationally.

The Transition Plan Taskforce’s (TPT) finalised disclosure framework aims to “remove friction” for preparers of climate transition plans by aligning with the work of the International Sustainability Standards Board (ISSB) and Glasgow Financial Alliance for Net Zero (GFANZ).

Speaking at the TPT launch event on 9 October, Baroness Penn, TPT Co-Chair and HM Treasury Lords Minister, said that the disclosure framework “complements and builds” on the ISSB’s global sustainability standards.

Penn said that the TPT framework is also aligned to the guidance developed by GFANZ, which has helped drive international “support and consensus” on the importance of transition plans.

“This alignment supports international convergence on what makes a transition plan robust and credible,” said Penn, adding that while the TPT framework has been developed in the UK, it has global applicability by design.

The disclosure framework is informed by the principles of “ambition, action and accountability”, the TPT said, to ensure firms’ transition plans take a “strategic and rounded” approach that explains how it will meet climate targets, manage climate-related risks, and contribute to achieving net zero.

“Credible transition plans are an essential tool to ensure the global economy transitions in line with a 1.5°C pathway,” said Nicolette Bartlett, Chief Impact Officer at global disclosure platform CDP.

“The launch of the disclosure framework is a vital step towards ensuring the private sector has the tools it needs to develop credible transition plans.”

In 2022, only 28% of UK companies disclosing through CDP said they had a transition plan. “This guidance is essential in increasing that number,” Bartlett added.

HM Treasury established the TPT in April 2022 to develop a ‘gold standard’ for private sector climate transition plans

Credible and robust plans 

According to the TPT, its framework provides the basis for companies to set out “credible and robust” transition plans as part of annual reporting its future business strategy. The framework will also support the creation of consistent, comparable company reports, and reduce the level of disclosure complexity faced by firms.

“As the extreme weather witnessed around the world has shown, climate change is increasingly having a very real impact on companies and capital,” said ISSB Vice-chair Sue Lloyd. “As a result, we know that companies have taken the decision – or are being asked – to develop plans to transition to be more climate resilient including through lower-carbon business models.

“For these companies, the publication of the Transition Plan Taskforce Disclosure Framework will be welcomed as both timely and important, helping them develop and disclose targets and action plans.”

Major companies and financial institutions including insurer Aviva, asset manager Legal & General Investment Management (LGIM), London Stock Exchange Group (LSEG), UK-based bank NatWest, and consumer goods company Unilever are among the TPT members responsible for creating the framework.

“In drawing on global market best practices, TPT stands as a leading example that can inform the development of common approaches to transition plan disclosure,” Mary Schapiro, Chair of GFANZ and Head of the Secretariat for the Task Force on Climate-related Financial Disclosures (TCFD).

“This framework, which builds on the best practice framework developed by GFANZ in 2022, will play a critical role in ensuring that UK companies and financial institutions develop and disclose credible and comprehensive transition plans needed to drive the net zero transition.”

“Companies and financial institutions must now rapidly adopt this powerful framework for transition planning,” said Catherine Howarth, CEO at non-profit ShareAction.

“The model launched today will allow the public at large and investors to hold companies accountable for action. People in the UK rightly expect the corporate community and the financial industry to be playing leading roles in climate action – there can be no excuses for delay.”

In March 2022, Aviva became the first firm to publish its climate transition plan, outlining its pathway to achieving net zero by 2040. Other notable firms that have also published transition plans include Phoenix Group and global financial services provider Allianz.

Easy targets, tough delivery 

Amanda Blanc TPT Co-chair and CEO of UK-based insurer Aviva has urged companies to “stick at it” with regards to their development of transition plans.

Speaking at the launch event, she noted that while many firms are “inspired and informed” by the TPT’s work there will “inevitably come a point where things start to get trickier”.

“This is the point where you’ll have to prioritise longer-term outcomes over shorter-term rewards, balance decisions across different parts of the business, and start doing things differently,” she said.

“It won’t be easy, but that’s the essence of building a transition plan – setting targets is easy, delivering them is hard, and that’s why the plan is vital.”

Additional guidance for preparers and users of transition plans has been published by the TPT alongside the disclosure framework.

This includes high-level guidance across 40 sectors, recommendations on the climate transition planning cycle, technical mappings and comparisons between the disclosure framework and several other well-known reporting frameworks, such as TCFD, as well as legal considerations for companies preparing reports using the disclosure framework and web-based implementation guidance.

Blanc called on companies and financial institutions to use the new framework to get their “houses in order” and told management teams to champion transition planning both inside and outside of their organisations.

“Stick with it, get others involved, and push the system – we can change it, and we must if we’re going to make progress,” she added.

Plans critical for climate action 

For accounting periods from January 2022, listed issuers, asset managers and asset owners in scope of the UK Financial Conduct Authority’s (FCA) climate-related disclosure rules are already expected to describe their plans for transitioning to a low-carbon economy.

Sacha Sadan, Director of ESG at the FCA, said: “Companies will need to think strategically about how they respond and contribute to the transition to a low emission, climate-resilient future.

“The disclosure framework released today by the TPT is an important step in this transformation. It will help companies communicate high-quality, consistent and comprehensive information on their transition plans to investors, giving them the confidence to finance the transition.”

The FCA intends to strengthen its expectations for transition plan disclosures, drawing on the TPT disclosure framework.

As a first step, on 10 August 2023, the FCA signalled its intention to consult on transition plan disclosures by listed companies in line with the TPT disclosure framework, alongside its consultation on implementing UK-endorsed ISSB standards. These new requirements are anticipated to come into force for accounting periods from January 2025. The first reporting would begin from 2026.

In 2023, the UK government committed to consulting on introducing requirements also for the UK’s largest companies to disclose their transition plans if they have them. This consultation, expected in the fourth quarter of 2023, will ensure consistency in disclosure requirements for both listed and large private companies.

“The international picture shows significant momentum behind transition plans from governments, regulators, and markets,” said Penn, noting that the G20 and multilateral regulatory forums are all “paying attention” and jurisdictions are considering how to can bring in their own requirements.

“Transition plans are critical for climate action and support the mobilisation of transition finance,” she said, adding that robust plans also provide a “fairer and more pragmatic approach” to meeting net zero that eases the burdens on working people.

Penn acknowledged that ultimately the market will determine if preparers’ plans are credible, with investors, through their stewardship, playing a key role in scrutinising transition plans to accelerate net zero progress.

“Businesses that manage the risks and seize the opportunities that transformation presents will flourish,” she added.

Read more articles like this on Regulation Asia’s sister publication, ESG Investor.

To Top
Share via
Copy link
Powered by Social Snap