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Transition Plans

Transition Plan Taskforce

At COP 26, the UK government established the Transition Plan Taskforce (TPT) “Disclosure Framework”. The initiative was tasked with establishing a “gold standard” for transition plan disclosures, aiming to position the UK at the forefront of the global transition to a net zero economy.

The final disclosure framework was launched on Monday 9 October 2023. This will be followed by sectoral guidance, published for further consultation.

Based on the TCFD framework, the proposed disclosure framework sets out a company (or investor’s) strategy for contributing to and preparing for a rapid and orderly net zero transition.

It includes:

  1. The target, current emissions (as well as technology implications and finances).
  2. Necessary actions (with timelines and milestones).
  3. Risks, opportunities, and engagement, with customers, employees, supply chain, community and regulators.
  4. Plan to assess progress.

 

Importantly, the plans should set out a strategic and rounded approach to decarbonisation, establishing how the company or investor is contributing to the economy wide transition.

The final recommendations were developed in collaboration with over 500 organisations. The framework is designed to guide businesses and financial entities in their decarbonisation activities, emphasising transparency, credibility and consistency.

The framework’s key features:

  1. Credibility:

    Plans should be credible, comprehensive and consistent.

  2. Investor engagement:

    The framework is intended to support investors in financing the transition.

  3. Global alignment:

    The need for transition plans to align with international standards, notably the European Sustainability Reporting Standards (ESRS), the International Sustainability Standards Board (ISSB) and the Global Financial Alliance for Net Zero (GFANZ) transition plan guidance. The framework was supported by Secretary of the US Treasury, Janet Yellen, at NY Climate week.

  4. Principles-based approach:

    The framework’s recommendations are principles-based, allowing for adaptability and evolution in line with best practice.

  5. Community building:

    The taskforce will continue to build best practice around transition planning.

Companies are encouraged to:

  1. Adopt a strategic approach, considering their broader role in the system and focusing on genuine contributions to emissions reductions.
  2. Avoid unintended consequences, such as “paper decarbonisation”.
  3. Disclose actions related to their product and service portfolios.
  1. Provide insights into the financial implications of their transition plans.
  2. Engage holistically with stakeholders, from the workforce to the natural environment.
  3. Align incentive structures with their transition ambitions.

For investors, the framework offers:

  1. Enhanced due diligence capabilities.
  2. Improved risk assessment tools.
  3. Deeper insights for informed decision-making.
  4. Opportunities for financial analysis based on companies’ disclosed financial impacts.
  1. Insights into companies’ stakeholder engagement strategies.
  2. A call for adaptive investment strategies in line with companies’ evolving transition plans.
  3. Opportunities for collaboration with companies and industry peers.
  1. Adopt a strategic approach, considering their broader role in the system and focusing on genuine contributions to emissions reductions.
  2. Avoid unintended consequences, such as “paper decarbonisation”.
  3. Disclose actions related to their product and service portfolios.
  4. Provide insights into the financial implications of their transition plans.
  5. Engage holistically with stakeholders, from the workforce to the natural environment.
  6. Align incentive structures with their transition ambitions.
  1. Enhanced due diligence capabilities.
  2. Improved risk assessment tools.
  3. Deeper insights for informed decision-making.
  4. Opportunities for financial analysis based on companies’ disclosed financial impacts.
  5. Insights into companies’ stakeholder engagement strategies.
  6. A call for adaptive investment strategies in line with companies’ evolving transition plans.
  7. Opportunities for collaboration with companies and industry peers.

Next steps:

The framework is available for voluntary use. It does not override existing legal or regulatory requirements.

The framework is adaptable and responsive, with mechanisms in place for stakeholders to provide feedback, ensuring its continuous evolution in line with industry needs.

That said, in the supporting panel for the launch, it was clear that it was envisioned that this will ultimately become mandatory, and that companies should consider as soon as possible to ensure that they ahead of the regulatory curve.

While there is more detail to follow, in particular guidance around sector-specific considerations, as highlighted in the launch panel at London Stock Exchange Group, “it’s about getting the process started; without starting there will never be a finish”.

In the weeks and months ahead, Canbury will explore the overlap between Taxonomies and Transition Plans (we believe the tools are mutually useful), the importance of assurance, as well as the interplay between private sector-led transition plans and government policymaking.

For more information, get in touch.

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