Stage 4 (Re-)implement your plan
The Transition Planning Cycle
Once you have developed your action plan, Stage 4 is to establish arrangements to:
Continue or start implementation
With the implementation and engagement strategies established, you will be ready to move to implementation of the plan. Use the metrics and targets defined under Stage 3 to monitor progress.
Internal governance & engagement pointers
- At this stage of the process, accountability for the delivery of individual actions may be clearly defined across individual functions/areas of the business.
- You may coordinate and monitor delivery across the company through both new and established governance structures.
Resources:
Disclose your transition plan in line with the TPT Framework
The TPT Disclosure Framework recommends that you publish material information about your transition plan as part of your general-purpose financial reports. In addition, the TPT regards it as good practice to publish your transition plan in a single standalone document that sits alongside the general-purpose financial reports and is updated periodically. For further information see the TPT Disclosure Framework.
Internal governance & engagement pointers
In preparing for disclosure, it is important to:
- Facilitate a conversation across sustainability, legal and finance functions to ensure a joint understanding of what information about your transition plan is determined to be material and will need to be included in your general-purpose financial reports.
- Directly engage with the board to ensure board members have a strong understanding of its purpose and content.
Case Study: Disclosing L&G’s first transition plan
A conversation with Wendy Walford, Head of Climate Risk, L&G
LSEG’s journey to disclosing a transition plan
The London Stock Exchange Group (LSEG) is a leading global financial markets infrastructure and data provider that plays a vital social and economic role in the world’s financial system. It operates across the breadth of the financial markets value chain, from issuance to investment decision making, through to trade execution, clearing and post trade reporting. LSEG summarises their approach to disclosing a transition plan in the below case study.
As a sustainability leader it was important for us to take the lead in in articulating our approach to climate change. In January 2021, LSEG joined the United Nations Climate Change ‘Race to Zero’ becoming the first global exchange group to commit to net zero. We wanted to communicate to the market and investors that our decarbonisation targets and initiatives will turn into action.
We laid out our roadmap in our first Climate Transition Plan, for which we received almost 99% shareholder support at our AGM in April 2022. This inaugural climate transition plan, set out how we aim to achieve our targets which have been approved by SBTi (Science-Based Target initiative) against a 1.5°C trajectory.
Our sustainability strategy focuses on those issues of greatest relevance to our business and our stakeholders, and where we can have the greatest positive impact. We are working towards three strategic sustainability priorities, while embedding sustainability into our customer propositions, market engagement and our own operations.
- Accelerating the just transition to net zero
- Enabling the growth of the green economy
- Creating inclusive economic opportunity
In developing and iterating our transition plan, internal and external stakeholder engagement and buy-in was very important; building relationships across the organisation is critical to being successful in transition planning. It is important to work beyond silos, and link climate related transition planning to broader group strategy and other key corporate functions such as finance, risk and operations. We spent time working with our governance groups to ensure they understood why we were reporting in a different way and had CEO support on our transition planning activity from the outset.
When it comes to disclosures, we continue to learn; our first report was focussed on our operational decarbonisation activity. In 2023, we published a single climate report which provides an update on both our transition plan as well as our TCFD Report; a holistic approach demonstrating LSEG’s response to climate-related risks and opportunities, and how we are contributing to an economy-wide transition.
In this updated report we utilised the TPT framework to detail out to a much greater extent information on how transition activity links to our commercial objectives and product development, and so explain how this is shaping strategy relating to the development of our products and services. The fact that the TPT Framework has been developed to complement the ISSB standards and GFANZ’s recommendations on transition planning, gives us confidence that our transition plan disclosures are aligned with a globally consistent approach.
The TPT Framework continues to shape how we look at our own strategic approach and outputs, with the breadth of considerations reflective of our own strategic priorities.
Monitor and report on progress
Monitor progress against the Strategic Ambition of the transition plan and the targets set in Stage 3. You will likely want to use both a combination of:
- internal targets (e.g. targets for particular business divisions or product lines) that are used to internally monitor and manage progress of the plan; and
- external targets, which are likely to be more high-level, but against which you undertake to report on at least an annual basis, to communicate progress on the plan to external audiences.
In addition to monitoring progress against targets, you may engage with external stakeholders to assess how the information was received and inform future iterations of the plan. In doing so, you may also evaluate the direction of travel and, if there have been important new developments or if new information has arisen, you may consider re-assessing and adjusting the plan (see Stage 1).
Internal governance & engagement pointers
- In establishing processes for monitoring and reporting, consider the internal controls of your transition plan disclosures.
- In doing this, you may find it helpful to engage internal audit, risk management or any equivalent function, for documenting, and recording metric methodologies, performing quality control on data inputs (including those from external sources), and assessing the adequacy of procedures for internal controls.
Resources:
- TCFD, Guidance on Climate-related Metrics, Targets and Transition Plans, particularly its guidance on cross-industry climate-related disclosure recommendations (pp. 10-28; 54-65)(2021)
- Climate Financial Risk Forum, Guide 2023: Climate Disclosures Dashboard 2.0 (2023)
- GFANZ, Financial Institution Net-Zero Transition Plans (2022)
- GFANZ, Expectations for Real Economy Transition Plans (2022)
This sub-step may inform disclosure against:
- TPT Sub-Elements: all under 4. Metrics & Targets
Leading practice: Review and improve your approach to data collection and monitoring of process against defined metrics and targets.
Transition plan disclosures and underlying plans will deepen and mature over time, as you deliver and iterate your transition plan. As part of this process, you may consider the following steps:
Identifying and mitigating data gaps: After having undergone Stages 1-3, you may find that there are critical data gaps and shortcomings in your approach to metrics and targets. These could include inconsistent definitions, limited availability of required inputs, variable quality of required inputs, and non-standardized analytical methodologies for deriving metrics. Data uncertainties are expected in emissions inventories, and the GHG Protocol explains how to document these in the chapter ‘Managing Inventory Quality’ of the Corporate Accounting Standard of the GHG Protocol.
Once you have identified your gaps, you may take steps to close these, including by engaging with third parties such as suppliers and value chain members.
Revising targets against delivery: As you implement your transition plan, you may find that progress against targets is ahead of or behind the planned trajectory, or that changes in data availability have made original targets less meaningful. This may prompt you to review your plan and targets (see Stage 3).
Consider defining internally, how regularly you will review your targets. For example, SBTi states that progress against emissions and targets can be done and disclosed every year. In doing so, key triggers for inflexion points may be identified and tracked to be used as reasoning in future transition plan disclosures. Examples of possible outcomes when revising targets are: accelerating planned activities, increasing ambition, or escalating engagement activities.
Internal governance & engagement pointers
When targets are restated, it is important to proactively engage key stakeholders (including board members, investors, civil society groups, and workers) to explain the rationale behind the revision.
Resources:
- FRC, CRR Thematic Review of climate-related metrics and targets (July 2023)
- GHG Protocol’s, Corporate Accounting and Reporting Standard (Chapter ‘Managing Inventory Quality’) (March 2004)
- SBTi, Financial Sector and TCFD Reporting Guidance (January 2023)
This sub-step may inform disclosure against:
- TPT Sub-Elements: all under 3. Engagement Strategy and 4. Metrics & Targets
Leading practice: Assessing approach to external assurance
It is important to note that the recommendations to include material information related to the transition plan in your general purpose financial report does not change the scope of the statutory audit. The scope does not go beyond the auditor’s responsibility to identify whether there are any material inconsistencies between other information and the financial statements, and knowledge obtained during the audit (as per International Standards of Auditing (ISA) 720).
External assurance for climate related information is an ecosystem that is still very nascent. Dedicated sustainability-related assurance standards and ethics codes are currently under development. In August 2023, the International Auditing and Assurance Standards Board (IAASB) launched a consultation on a Proposed International Standard on Sustainability Assurance.
Even in the absence of new standards and ethics codes, and mandatory assurance obligations some entities are choosing voluntarily to obtain external assurance on sustainability – related information, including GHG emissions.
The most widely used assurance standards for these engagements include:
- ISAE 3000 (Revised) for Independent Assurance Reporting Engagements Other than Audits or Reviews of Historical Financial Information;
- ISAE 3410 for Independent Assurance Reporting engagements on Greenhouse Gas Statements;
- AA 1000 Assurance Standard v3; and
- ISO 14054 -3: 2019 Greenhouse gases – Part 3: specification with guidance for the verification and validation of greenhouse gas statements.
Similarly, the process of formal verification of plans or targets is an emerging practice.
Where you do opt to obtain assurance or verification over information in your transition plan, it would be good practice to disclose the following information on the engagement:
- the level of assurance or verification obtained;
- the scope of the engagement;
- the professional standard(s) against which the engagement was performed;
- who the assurance provider is; and
- the outcome of the engagement, for example, whether the assurance provider’s conclusion is unqualified or modified.
As part of your assurance and verification activities, you may wish to seek an external perspective on the extent to which your transition plan is aligned with the overall strategic and rounded approach being recommended by the Transition Plan Taskforce, and the five key disclosure elements, as well as more specific and formal verification of achieving certain targets and metrics (e.g. with regard to GHG emissions).
Resources:
IAASB, Exposure draft for ISSA 5000 General Requirements for Sustainability Assurance Engagements (August 2023)
This sub-step may inform disclosure against:
- TPT Sub-Elements: 5.2 Management roles, responsibility and accountability.
