Businesses invited to have their say on new ‘gold standard’ for net zero transition plans
A new draft framework for private sector climate transition plans has been launched for consultation – and is set to inform mandatary climate reporting regulation in the UK.
The UK Transition Plan Taskforce (TPT), announced by the UK government last year, has been working towards the creation of a ‘gold standard’ for transition plans. Today (8th November) it published its Disclosure Framework and accompanying Implementation Guidance, along with a ‘Sandbox’ for companies and financial institutions to test implementation. The Disclosure Framework and Implementation Guidance are open for public consultation until 28th February 2023.
Putting promises into action
High quality transition plans are considered crucial for the transition to net zero. A growing number of entities have already announced net zero targets and other climate pledges. As of June 2022, around 702 companies from the Forbes 2000 list have announced a net zero target. But early plans have varied in quality and often lack detail on the short-term actions that are being taken to achieve these targets. This makes it difficult to assess the credibility of individual plans, or to compare approaches to transition planning across multiple entities.
The TPT Framework emphasises the need for concrete, short-term action by companies and financial firms across the economy. The TPT recommends that companies and financial firms consider the full range of levers at their disposal to contribute to, and prepare for, an economy-wide transition to net zero. It says this will help avoid potential unintended consequences of ‘paper decarbonisation’.
Mandatory transition planning
One year ago, at COP26, then Chancellor Rishi Sunak announced that the UK will move towards making publication of transition plans mandatory.
The TPT’s Framework and Implementation Guidance will be used by the Financial Conduct Authority (FCA) to strengthen their transition plan disclosure expectations of listed companies, asset managers and regulated asset owners.
In January 2022, the FCA introduced rules for listed companies and large regulated asset owners and asset managers to disclose transition plans as part of their Task Force on Climate-Related Financial Disclosures (TCFD)-aligned disclosures, initially on a comply or explain basis. The first disclosures under these rules will be made in 2023.
Over the next two years, the FCA will draw on the TPT’s outputs to strengthen future disclosure rules for listed companies and financial firms.
The Disclosure Framework and Implementation Guidance can be accessed here. The consultation is open until 28th February 2023.