UK puts ESG heavyweights to work on transition plan ‘gold standard’

The UK has appointed a who’s who of the sustainable finance and non-profit sectors to develop the first “gold standard” for corporate transition plans.

The standard will include a sector-neutral framework for private companies, sector-specific guidance for finance and real economy activities, and best practices for both preparers of transition plans and users. Participants include ShareAction CEO Catherine Howarth, IIGCC chair and Brunel Pension Prtnership CRIO Faith Ward, Church of England Pension Board CRIO Adam Matthews and LSE academic Nick Robins.

The announcement is the first major development since the UK said it would start requiring some companies to publish net-zero transition plans from 2023 at the COP26 keynote last year. UK chancellor Rishi Sunak said at the time that corporate plans would be judged against a science-based standard “to guard against greenwashing”.

A factsheet published in November said the mandatory transition plans will initially cover asset managers, regulated asset owners and listed companies.

The standard is to be developed by the newly-formed Transition Plan Taskforce (TPT) – overseen by the UK treasury – led by a steering group of regulators and corporates which will be co-chaired by Aviva CEO Amanda Blanc and treasury secretary John Glen, said the government. It will be given a two-year mandate to deliver the standard.

Other members of the Steering Group include the CEOs of accounting body ICAEW (Michael Izza), LGIM (Michelle Scrimgeour), LSEG (David Schwimmer) and WWF UK (Tanya Steele), as well as TCFD lead and GFANZ vice-chair Mary Schapiro. The group will also include the FCA’s newly-hired social and governance head Sacha Sadan – formerly stewardship head at LGIM – and the UK prudential regulator’s Sarah Breeden (observer).

It is supported by a delivery group of industry experts which include the previously mentioned ESG figures, LSEG sustainability chief David Harris, Impact Investing Institute CEO Sarah Gordon, CCLA stewardship director Helen Wildsmith and Green Finance Institute executive director Ingrid Holmes, formerly policy head at Federated Hermes. It will be chaired by Julie Baddeley, chair of climate board non-profit Chapter Zero.

The UK’s national responsible investment body UKSIF was notably not included in the task force despite advocating on the topic. The group said that it had already submitted views to the TPT and “looked forward to working closely with the task force” when contacted by RI for comment.

Last year, UKSIF called on the government to expand the scope of planned mandatory transition plans to large private companies, warning against the “serious threat of greenwashing”, but has backed the government’s opposition to mandatory net-zero commitments.

The TPT secretariat is provided by the UK Centre for Greening Finance and Investment and climate change think tank E3G.

Sacha Sadan from UK financial regulator FCA, the most likely enforcer for the new rules, said that the standard will build on existing TCFD guidance, which the FCA has already integrated into current disclosure requirements for listed and regulated firms.

The UK is set to be the first country to introduce mandatory disclosure requirements on corporate transition plans, followed by Japan. The East Asian country recently appointed its own task force to develop criteria for corporate transition plans, which will include third-party audits, but details on its roll-out have not been made public.

Last week, 47 NGOs including Reclaim Finance and BankTrack wrote to GFANZ after revealing that only 11 out of the initiative’s hundreds of members had adopted “robust policies” to end funding of new coal mines, and that six of of the eight top holders of securities in the global coal industry were GFANZ members. Roughly 450 financial firms have signed up to GFANZ, which was launched at COP26 to accelerate decarbonisation in the finance sector.