Background information about the Transition Plan Taskforce.
Developing a gold standard
Effective transition finance is dependent on credible transition plans. To contribute to the work of the new Transition Finance Market Review, the mandate of the Transition Plan Taskforce (TPT) will be extended to 31 July 2024, with the possibility of a further 3-month extension.
The TPT was announced at COP26 in Glasgow and launched in April 2022 to establish the gold standard for transition plans. As part of its original two-year mandate the TPT has delivered:
- The final TPT Disclosure Framework, informed by nearly two years of engagement with over 600 organisations in the UK and globally;
- Draft Sector Guidance for Asset Owners, Asset Managers, Banks, Food & Beverage, Electric Utilities & Power Generators, Metals & Mining, and Oil & Gas;
- A draft Sector Summary, covering nearly 40 sectors at a high level;
- Guidance on the Transition Planning Cycle and guidance to help preparers Explore the Disclosure Recommendations, both including case studies;
- Technical mapping to the final Climate-Related Disclosures standard (IFRS S2) issued by the International Sustainability Standards Board (ISSB) and the TCFD’s Recommendation and Guidance;
- A comparison of the TPT Disclosure Framework to the European Sustainability Reporting Standards (ESRS); and
- Legal considerations for preparers of transition plans using the TPT Disclosure Framework.
- Outputs were informed by working groups on all seven sectors and Nature, Just Transition, and Adaptation.
This progress has been accompanied by international engagement that is informing approaches and new regulatory requirements in a number of jurisdictions, and through multilateral processes. This includes with the Financial Stability Board, IOSCO and the NGFS, as well as the G7, G20, UNFCCC and the Coalition of Finance Ministers for Climate Action.
Final Sector Guidance and notes on Nature, Adaptation, Just Transition, Emerging Markets & Developing Economies and SMEs will be published in Spring 2024. A Forward Pathway on transition plans will be published in Summer 2024.
Informing future UK regulation
The TPT’s work takes place within the broader landscape of UK regulation and legislation around sustainability disclosures. It will inform the UK’s future Sustainability Disclosure Requirements framework.
- In October 2021, the UK Government published the Greening Finance Roadmap, committing to take action to help align UK financial flows with a net zero economy.
- At COP26 in November 2021, the Chancellor announced the establishment of the TPT as part of the UK’s plans to become the world’s first net zero financial centre, ensuring financial flows shift towards supporting net zero. The UK committed to move towards making publication of transition plans mandatory.
- From December 2021, the FCA introduced climate-related disclosure requirements aligned with the TCFD’s recommendations. Transition plan disclosures are provided for in the Financial Conduct Authority’s (FCA) rules. Listed issuers are required to make TCFD-aligned disclosures on a comply or explain basis. In doing this, issuers are expected to carry out a detailed assessment of the TCFD’s all-sector guidance, which includes that entities should describe their plans for transitioning to a low carbon economy. Similarly, FCA-regulated asset managers and owners are required to make TCFD aligned disclosures and take reasonable steps to ensure these disclosures are consistent with the TCFD’s all-sector guidance.
- FCA guidance also encourages listed companies, asset managers and asset owners that are headquartered in, or operating in, a country that has made a commitment to a net zero economy to consider the extent to which they have considered that commitment in developing and disclosing their transition plans.
- In March 2023, in the 2023 Green Finance Strategy, the UK government also committed to consulting on introducing requirements for the UK’s largest companies to disclose their transition plans if they have them. This consultation, expected in the fourth quarter of 2023, will complement the FCA’s requirements and ensure consistency in disclosure requirements for listed and large private companies. The government also reinforced its support for the International Sustainability Standards Board (ISSB).
- In August 2023, the FCA announced it will consult on expectations for listed companies’ transition plan disclosures. The FCA will consult on introducing disclosure requirements aligned with the TPT Framework within the FCA Handbook at the same time as the UK-endorsed ISSB standards, explicitly recognising the relationship between the two frameworks.
Along with the UK, many countries are expected to adopt the International Sustainability Standards Board (ISSB) global baseline and build on it. At the same time, transition planning, and transition plans, are becoming important considerations for central banks, supervisors, standard setting bodies and other international organisations.
- The TPT Framework is designed to be consistent with, and build on, the final climate-related disclosure standard (IFRS S2) issued by the ISSB. IFRS S2 includes several provisions that are relevant to transition planning, including the requirement that an entity disclose information about any climate-related transition plan it has. The TPT Framework provides a set of Disclosure Recommendations that an entity can use as guidance on how to report more effectively on the transition plan-related aspects of IFRS S2, as part of wider sustainability-related disclosures in its general purpose financial reports.
- In addition to these efforts to ensure alignment and integration with the ISSB Standards, the TPT Framework also draws on GFANZ’s framework and guidance for credible, comprehensive and comparable net zero transition planning and uses the same core components and structure.
- This means that the TPT Framework and GFANZ are both part of an aligned, consistent effort to support the development of private sector transition plans.
- The TPT aims for the Disclosure Framework to inform the development and convergence of transition plan disclosures in other jurisdictions. To that end, the TPT is engaging with the FSB, NGFS, IOSCO, ISSB, other relevant multilateral organisations and financial regulators in other jurisdictions. The TPT is also engaging with other countries that are developing disclosure and transition plan frameworks.