UK taskforce launches final transition plan disclosure framework

The UK’s Transition Plan Taskforce (TPT) has published its final disclosure framework to help organisations set out credible and robust climate transition plans. 

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. 

The taskforce is led by a steering group of private and public sector leaders, co-chaired by Aviva CEO Amanda Blanc and HM 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 and E3G.   

Last November, the initiative unveiled its draft sector-neutral disclosure framework for consultation. Then in July, the TPT published an update detailing feedback from the consultation – although overall stakeholders strongly endorsed TPT’s approach, key implementation concerns were raised. 

As outlined in previous drafts, the TPT framework consists of the three principles: ambition, action and accountability. These are underpinned by five disclosure elements – foundations, implementation strategy, engagement strategy, metrics & targets, and governance – under which there are 19 sub-elements.

Some changes have been made since the previous update. The foundations element, which is the first step in the disclosure framework, has been tweaked and expanded on with an additional sub-element.

It is asking companies to report on their strategic ambition, business model and value chain and key assumptions and external factors, while the previous draft asked for disclosure on objectives and priorities, as well as business model implications.

Under disclosure requirements for companies’ implementation strategies, the framework no longer lists “sensitivity analysis” as a sub-element. As per the November draft, this would have involved disclosing “key assumptions and dependencies underlying the entity’s business, operational and financial plans and the implications for achievement of the strategic ambition in its transition plan if its central assumptions are not met.” 

This is an area where TPT in July flagged that there were concerns around implementation challenges, in particular around “isolating individual dependencies and assumptions and quantifying the impact if certain assumptions are not met”. 

A reference to it does remain, however, in the section where TPT elaborates on its three guiding principles. “An entity should assess the sensitivity of its plan to changes in key assumptions and external factors on which it depends, and should seek to mitigate delivery risks where possible,” it says.

Nature and Just Transition 

The final framework also clarifies the TPT’s approach to incorporating nature, just transition, and climate adaptation into plans. 

In February, the initiative launched working groups on the issues which were tasked with providing recommendations on how the draft framework could be strengthened. 

According to the final framework, entities should set out whether and how it is pursuing the objectives and priorities for “responding and contributing to the transition towards a low GHG emissions, climate-resilient economy” in a manner that “captures opportunities, avoids adverse impacts for stakeholders and society, and safeguards the natural environment”.

This would be reported on under the foundations element, through which an entity would disclose whether and how it has identified, assessed and taken into account the impacts and dependencies of the transition plan on its stakeholders, society, the economy and the natural environment, throughout its value chain, that may give rise to sustainability-related risks and opportunities.

“Given the role of nature loss in driving climate change and the importance of nature for greenhouse gas sequestration and supporting climate resilience, users will find it important to understand whether and how an entity’s climate transition plan safeguards nature,” the TPT said in its implementation guide.  

The TPT has provided examples to help guide such disclosures. For example, companies could set out objectives and priorities for addressing their impact on nature, or report on adverse or positive impacts on workers such as “from new opportunities or lay-offs resulting from a change in the entity’s strategic direction”.  

Disclosing the extent to which entities identify and manage impacts and dependencies on “stakeholders, society, the economy, and the natural environment” have also been incorporated into “GHG metrics and targets” and “carbon credits” sub-elements.

Brendan Curran, a policy fellow on sustainable finance at the Grantham Research Institute on Climate Change and the Environment who co-led the working group on Just Transition, told Responsible Investor the combination of real economy and finance sector representatives allowed the group to produce detailed and credible guidance to the TPT delivery group. 

“It is positive to see the references to the social implications of the net-zero transition and the implementation guidance provides a solid blueprint for both preparers and users of transition plans to incorporate the just transition,” he said. “There is more work to be done both at a UK level and to ensure international interoperability.” 

As RI reported last month, the ISSB is also prompting firms to consider nature through its existing climate standards, and aims to publish guidance on this by the end of the year.

GFANZ and ISSB alignment

The TPT said its framework is “consistent with” and build on the work by the International Sustainability Standards Board (ISSB) and supports compliance with IFRS S2.  

The TPT said that this was ensured by leveraging “the ISSB’s definition of a climate-related transition plan” and applying “the same approach to materiality and the wider set of concepts and definitions that are set out in the ISSB’s General Requirements standard (IFRS S1)”. 

The disclosure framework is also aligned with the transition plan guidance developed by the Glasgow Finance Alliance for Net Zero (GFANZ), “and so supports international convergence on what makes a transition plan robust and credible”, it said.   

Monday also saw the TPT publishing for consultation a “sector summary” covering decarbonisation levers and metrics and targets for 40 sectors. 

It has also published guidance on how entities can start or continue their “transition planning journey”, and a document detailing the implications of English law and EU law for publishing a transition plan in accordance with the disclosure framework.   

At the end of this year, it is expected that the UK government will consult on introducing requirements for the UK’s largest companies to disclose their transition plans if they have them.