TPT: Private Sector Enters “New Phase” in Climate Transition

UK Taskforce calls on financial institutions and companies to accelerate high-quality transition plans amid incoming mandatory disclosure, outlines biodiversity role.

Last night, Transition Plan Taskforce (TPT) Co-chairs Amanda Blanc and Baroness Joanna Penn revealed the TPT’s workplan to support financial decision making and capital allocation to ensure companies and financial institutions deliver on 2050 net zero commitments. 

At the Guildhall in London, they called on the market to publish transition plans this year, reiterating that a significant increase in private sector plans is required to secure the UK’s transition to net zero. 

“Momentum is building on transition plans, but this will only be sustained by firm action, a will to change and our ability to think beyond our own businesses,” said Blanc, also Group CEO of Aviva. 

“I hope in 2023 we will start to see transition plans at every level – with companies, countries and international institutions setting out their routes towards a net zero future – give it a go and get involved.” 

In analysis recently prepared by non-profit CDP, of those organisations who have disclosed a transition plan, only 0.4% had a credible plan. Further, data from the report showed that while companies are recognising the need for climate transition plans many are not moving fast enough amidst incoming mandatory disclosure. 

“We need a significant uptick in these plans, because there aren’t many, and the ones that do exist vary in terms of detail,” Jacques Morris, Team Leader, TPT Secretariat told ESG Investor, noting that market currently lacks sufficient maturity for the significant disclosure of transition plans.  

“We recognise it’s not easy – plans won’t be perfect,” he said. “This is all about having a first crack, getting on with the process and putting together a plan – we are urging the market to get going.” 

No plan, no transition 

On 8 November 2022, at COP27, the TPT launched its disclosure framework and implementation guidance for public consultation until 28 February, 2023. 

In 2023, the TPT aims to finalise its disclosure framework and implementation guidance and will develop sectoral guidance. It also plans to increase its engagement with other jurisdictions and standard setters, including the International Sustainability Standards Board (ISSB) to support global convergence on transition plans. 

Speaking during a panel discussion at TPT event last night, Sarah Breeden, Bank of England Executive Director and TPT Steering Group Observer, stressed the importance of economy wide transitions plans in enabling the financial system to allocate capital and manage risks through the climate transition.  

Also, speaking on the panel, Tanya Steele, CEO of WWF-UK and TPT Steering Group Member, said: “The businesses and financial institutions we work with on the Taskforce recognise that climate change and nature loss drive each other – they are two sides of the same coin, and it is important that the current guidance recognises this. 

“Restoring nature is one of the most cost-effective ways to tackle climate change.  Businesses must show they are serious about playing their part both by tackling the drivers of biodiversity loss in their supply chains and taking measures to help restore nature.” 

Sacha Sadan, FCA Director of Environment Social and Governance and TPT Steering Group Member, was also in attendance. He told onlookers that the regulator is committed to playing its part in the TPT disclosure framework.  

Through our links with regulators internationally, we will promote global consensus around the key elements of the Framework,” he said. “We encourage listed companies and financial services firms to engage early with the Framework and accelerate their preparation of high-quality transition plans.” 

Dr Ben Caldecott, Co-Head, Secretariat, TPT, ended the event by urging financial institutions and companies to “get going” with transition plans and “give it a go”, a sentiment shared by all members of the panel.  

“There is no transition finance without a transition plan,” he added.  

“Real economy” representation 

To support robust, market-wide recommendations and inform future work on transition plans, new members and observers were added to the TPT Delivery Group. 

New members include drinks company Diageo, energy firm SSE and pension scheme operator Railpen. New observers to the group include the Department for Environment, Food and Rural Affairs, the Department for Work and Pensions, the Department for Business and Trade, the Financial Reporting Council, and The Pensions Regulator. 

“We want to add more ‘real economy’ representation in the TPT Delivery Group, so we’re really pleased that we’ve got SSE and Diageo onboard – their experience and perspective is so important,” Morris said, adding that both companies are active and engaged in the TPT process, so are well-placed to collaborate with others on transition plans. 

The TPT will also expand its Sandbox to accelerate new capabilities that can support users including investors, banks, analytics providers, and preparers – typically financial institutions and firms – of transition plans.  

Developers participating in the Sandbox can benefit from: facilitated access to help test, refine, and scale capabilities; access to matchmaking and showcasing events; signposting to datasets, models and tools, including through the UK Centre for Green Finance and Investment (CGFI) and access to expertise from TPT and CGFI experts. 

“For there to be significant disclosure of transition plans in the market, we need to have an ecosystem to support it,” said Morris. “By expanding the sandbox to accelerate new capabilities, it supports users to use and assess transition plans, as well as preparers to make them.” 

Impact interdependencies  

The TPT has also confirmed its intention to respond to provide guidance on ensuring transition plans incorporate wider sustainability issues such as nature, adaptation and just transition.  

The first phase of the TPT in 2022 considered the interdependencies between climate transition plans and other sustainability topics. The TPT will explore wider areas through new working groups on nature, adaptation and just transition.  

“There is a growing conception of the link between climate, nature, adaption and a just transition, so the TPT is starting these working groups to take advice on the links between these areas,” Morris said.  

The TPT will also commence work on debt and credit, the application and utility of transition plans in emerging markets and developing countries, and supporting small and medium sized enterprises in the transition plan journey.

“These areas consistently come up as areas of high interest to lots of stakeholders,” said Morris. “There is also a lot of interest on how larger companies can engage with SMEs in their own transition journeys.”

“The announcement from the TPT represents the next step, and a new phase, in the climate journey for the private sector in creating credible and robust transition plans,” he added.

The Impact Investing Institute (III), as part of its Just Transition Finance Challenge, has developed Just Transition Criteria for financing vehicles to help deliver on net zero.   

The III has requested feedback on those criteria as part of a public consultation process. The deadline for submitting feedback is 31 March 2023. The institute will review feedback and plans to launch the Just Transition Criteria in mid-2023.   

The Just Transition Criteria aim to provide asset owners and managers with practical tools to be used alongside existing standards and frameworks for sustainable and impact finance.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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