Key implementation concerns have been raised in a consultation on the UK’s proposed transition plan disclosure framework, according to an update by the UK Transition Plan Taskforce (TPT).
First announced at COP26, the TPT was launched by the Treasury in April 2022 and tasked with developing a gold standard for transition plans from UK financial institutions and corporates.
Last November, the initiative unveiled for consultation its draft sector-neutral disclosure framework for companies and financial institutions.
According to Thursday’s update, the TPT engaged more than 500 organisations and received more than 80 written responses.
Overall, stakeholders strongly endorsed TPT’s approach, according to the initiative. Respondents emphasised that they expect it will encourage firms to take a strategic approach to managing climate risks, and also supported the TPT’s commitment to building international consistency and coherence.
However, concerns were raised about key implementation challenges. These included the complexity of preparing a comprehensive plan, how to navigate the guidance when particular sub-elements may be less relevant to the transition strategy of a particular entity, and data limitations.
Some respondents also flagged the potential commercial sensitivity and liability risks that could arise from disclosing aspects of their transition strategy.
The TPT draft framework consists of five overarching disclosure elements with 19 sub-elements.
For some sub-elements – including the reporting of a roadmap of actions to deliver the transition plan and the disclosure of planned changes in an entity’s portfolio of products to meet the plan – respondents expressed concerns around requirements to quantify the contribution towards, or expected impact of, a specific action.
With regards to financial planning, another sub-element, an implementation challenge raised was the need to quantify expected impacts “given uncertainties, and isolating financial implications of a financial plan from other financial drivers”.
To address implementation concerns in the final framework, the TPT said it will adjust the recommendations “under some sub-elements” to ask entities to “explain the expected principal contribution of planned actions towards their objectives, rather than quantifying expected impacts”.
A spokesperson said it was “too early” to say which sub-elements would be affected.
Many respondents also called on the TPT to strengthen its guidance on how entities can appropriately integrate broader sustainability considerations into their transition plans.
Most notably, they urged the initiative to clearly communicate in the guidance that an entity’s climate transition plan should integrate related issues such as adaptation and climate resilience, nature and biodiversity, social impacts and a Just Transition.
In contrast, some respondents also cautioned against extending the scope of the TPT’s guidance, “noting implementation challenges and guidance gaps”.
In February, the TPT launched three working groups on the above issues, which will provide advice on the appropriate integration of these topics into the TPT’s outputs.
Thursday’s update also included details of sectors that will receive further deep-dive guidance. Three of the seven relate to finance: asset managers, asset owners, and banking.
Further guidance will also be provided for the food and agriculture, metals and mining, oil and gas, and electric utilities and power generators sectors.
The final disclosure framework and implementation guidance is due to be published in October. The sector-specific guidance consultation will then start in November, with final guidance expected in early 2024.
In parallel, the UK government is set to launch a consultation on transition plan requirements for the largest companies, including private companies, towards the end of this year.
The taskforce is led by a steering group of private and public sector leaders, co-chaired by Aviva CEO Amanda Blanc and treasury lords minister Baroness Penn. It is supported by a delivery group of senior experts from across industry, academia and civil society. The secretariat for the TPT is provided by the UK Centre for Greening Finance and Investment (CGFI) and E3G.