Taskforce is finalising sector-neutral guidance and working on industry-specific alignment with ISSB ahead of Q1 2024 launch.
There is “massive momentum” behind the development of climate transition plans, with the G7 announcing support, and international regulatory networks starting work in the area, according to Jacques Morris, Secretariat Team Lead of the UK’s Transition Plan Taskforce (TPT).
The TPT will provide a framework for UK companies to disclose their climate transition plans, but is designed to be compatible internationally. The UK government expects to make the climate transition plans mandatory, and the work of the TPT, chaired by Baroness Penn, HM Treasury Lords Minister, and Amanda Blanc, CEO of Aviva, is seen as offering an avenue for investors to get a whole economy overview of climate transition and companies to set out how they will meet their climate commitments.
The TPT recently published a status update report, outlining its next steps after consultation with the market. It will consider further integrating themes such as nature, adaptation and the just transition into the final TPT Disclosure Framework and ensure close alignment with the recently launched final standards of the International Sustainability Standards Board (ISSB). The TPT will also start work on already-planned additional sector-specific guidance including parts of the financial sector and some carbon-intensive sectors, as it works to full final guidance being completed in Q1 2024.
Broad engagement
Morris told ESG Investor that over the year it had been engaging significantly with the UK economy and internationally on its work. “A key part that frames TPT’s outputs is the fact that the inputs have come from such a broad range of participants. We’ve engaged over 500 organisations since the consultation was launched.”
Morris said the TPT was keen to support the development of a global norm on transition plans, along with others such as the Glasgow Financial Alliance for Net Zero.
Regulator representative bodies increasing their focus on transition plans include the Network on Greening the Financial System (NGFS) and the International Organization of Securities Commissions (IOSCO)
On whether the UK could become a standard setter in this area, Morris said: “The work really does reinforce UK global leadership as a green financial centre in an expanding and increasingly important market, so it brings big benefits for the UK.
“And we should also recognise that other jurisdictions are also bringing in requirements such as the EU.”
The TPT’s status update report notes that at least four jurisdictions have indicated that they are bringing in a form of climate transitions plans. The EU is proposing new requirements to disclose climate mitigation transition plans under the Corporate Sustainability Reporting Directive and draft US Securities and Exchange Commission climate risk rules propose public firms include their transition plan in disclosures where voluntarily adopted as part of the firm’s climate-related risk management strategy.
Australia and Brazil are also proposing climate transition plans. “It’s really important we’re seeing a pivot to regulation to ensure good climate outcomes,” said Morris.
Concerns over complexity
The consultation on its direction found there was broad support for the TPT framework with 85% of respondents agreeing with it overall. But there were concerns raised, such as the complexity of preparing a comprehensive plan, data limitations and the potential commercial sensitivity and liability risks that may arise from disclosing aspects of a company’s transition strategy.
The TPT is part of the UK’s drive to mobilise money flows into the real economy to spur the country’s climate transition. Morris said an investor would use a transition plan “to understand basically how to allocate capital to support the economy-wide transition”.
On next steps, Morris said the UK has committed to consulting on transition plan requirements for large public and private companies and regulator the Financial Conduct Authority (FCA) will also consult on transition plan requirements as part of a wider consultation on the adoption of the ISSB’s final standards.
“This is creating a really useful signal to the market,” he said. “Before these requirements are becoming mandatory, the TPT is already providing the guidance and the tools that can help companies and financial institutions get going now. That’s the key thing. The sooner firms start preparing and publishing their transition plans, the sooner they can expect to see benefits, because they’ll be further ahead in terms of competing with their peers.”
Morris also said the TPT process was an example of smart regulation as the final disclosure framework should be interoperable with ISSB standards. “It supports global alignment which reduces burden on business and creates efficiencies.”
