The Transition Plan Taskforce (TPT) has today (9 October) published a best practice climate transition plan disclosure framework designed to help companies and financial institutions accelerate their pursuit of net zero emissions.
The TPT is a UK-led initiative to develop a “gold standard” for climate transition plans, helping companies and financial institutions to prepare for and contribute to a net zero economy.
First announced at the COP26 Climate Summit in Glasgow in 2021 and launched in April 2022 by the UK Treasury, the TPT issued its first proposal for a ‘gold standard’ for transition plans six months later.
Today’s announcement unveils the TPT’s recommendations aimed at guiding corporate climate disclosure in alignment with globally recognised standards and frameworks, such as the International Sustainability Standards Board (ISSB).
The new framework encourages companies to take a strategic approach to decarbonisation, including setting clear climate targets, managing related risks, and contributing to the wider pursuit of net zero. In addition, it also provides guidance on how to produce transition plans as part of annual reporting processes, to ensure that they are consistent and comparable. This is intended to reduce the burden of reporting for companies as they navigate new climate reporting rules.
In June 2023, the ISSB issued its first two finalised frameworks, IFRS S1 and IFRS S2, with the expectation that the first corporate reports aligned with them will be published in 2025. IFRS S1 is climate-focused, while IFRS S2 covers other related environmental risks and opportunities.
This was shortly followed by the UK government’s announcement that the ISSB standards would heavily influence the standards underpinning the government’s planned Sustainability Disclosure Rules (SDR).
The Financial Conduct Authority (FCA) has welcomed the announcement, with Sacha Sadan, Director Environmental, Social and Governance at the organisation commenting, “The Disclosure Framework released today by the Transition Plan Taskforce is an important step in [the net zero] 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.”
Under requirements introduced by the FCA in January 2022, listed companies and large regulated asset owners and managers have to publish transition plans on a ‘comply or explain’ from this year. The FCA’s requirements for transition plans are based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The TPT reiterates that its recommendations in creating a Transition Plan should not be seen as separate from what is suggested by the ISSB and the TCFD, but rather “provides additional recommendations on what a good practice climate transition” looks like.
Today’s guidance should help more firms comply with the rules, while also effectively raising the bar for those firms seeking to explain why they cannot produce a transition.
