The gold standard for climate transition plans takes shape

The UK’s Transition Plan Taskforce (TPT) was launched in 2022 to develop a ‘gold standard’ for private sector climate transition plans, and it has moved at speed to deliver on this. The Disclosure Framework and Implementation Guidance have already been written and put out for consultation.

IEMA participated in the consultation, holding a workshop to listen to members’ views. Members suggested that transition plans should include mapping organisational green skills, and a strategy to address any gaps.

The Disclosure Framework either matches or goes further than the existing Task Force on Climate-related Financial Disclosures requirements and the soon-to-be-launched International Sustainability Standards Board obligations, and the guidance is clear and easy to follow. The TPT is also accommodating on lead times, acknowledging the complexities facing businesses in preparing plans.

The TPT has declared a goal to support better-informed decisions about how to allocate capital, in turn supporting the UK’s transition to net zero. Success in this will largely depend on two things.

First, climate crises notwithstanding, business allocates capital based on a judgement on risk and return. If the risk of not supporting the transition to net zero has an attractive enough price, business will take that risk. It is ultimately up to regulators to create an environment in which the risk is too high at any price.

Second, transition plan-based financial decisions will be based on promises on long-term forward plans. These will only be better informed if the governance stage of monitoring, auditing and reporting is robust and trustworthy. Otherwise, the transition plan will be worthless at best and at worst a potentially illegal misrepresentation of the company’s position to investors.

The financial sector appears to be fully behind the transition planning requirements, and boards seem ready to listen to their recommendations. While transition plans can provide a detailed map of the way forward, we will need the regulators to provide the compass.