Transition Plan Taskforce launches framework to address climate change

Framework ‘can act as a blueprint to inform policy approaches in other markets’

The Transition Plan Taskforce (TPT) has launched its ‘best practice’ disclosure framework for climate transition plans to allow companies and financial institutions to play their part in the shift to net zero.

Aiming to help companies and financial institutions create consistent, comparable company reports on climate transition plans, and reduce the level of disclosure complexity faced by firms, the launch comes after a short consultation period in which financial firms and real economy companies were asked for input on the feature.

Created by financial institutions including Aviva, Legal & General Asset Management, LSEG and NatWest, and announced at the London Stock Exchange this morning (9 October), the disclosure framework encourages companies to implement a transition plan that takes a strategic and rounded approach in explaining how it will meet climate targets, manage climate-related risks and contribute to net zero, via the principles of ambition, action and accountability.

Five steps

The framework also provides the basis for companies to set out credible and robust transition plans as part of annual reporting on forward business strategy. Drawing on the transition plan components identified by the Glasgow Financial Alliance for Net Zero (GFANZ), TPT set out five key elements of a ‘good practice’ transition plan.

First, an entity should disclose the strategic ambition of its plan, comprising objectives and priorities for contributing to the transition towards a low-GHG emissions, climate-resilient economy. This could include disclosure about the implications that the transition plan will have on their business model and value chain, as well as the key assumptions and external factors on which the plan depends.

Recommended disclosures for individual entities also includes implementation and engagement strategies within its business operations and value chain; metrics and targets they use to monitor progress toward their strategic ambition; and evidence to show about the transition plan is embedded within governance structures and organisational arrangements.

TPT disclosure framework

The TPT Disclosure Framework
Source: Transition Plan Taskforce

According to TPT, this provides the ‘gold standard’ for disclosure of transition plans, which can be applied voluntarily but is also ready for application in domestic regulation.

Additional guidance for preparers and users of transition plans have been published alongside the disclosure framework, including guidance on the climate transition planning cycle, technical mappings and comparisons between the disclosure framework and other reporting frameworks, and legal considerations for companies preparing reports using the disclosure framework.

“We have seen good progress on climate disclosures in the UK and internationally, but it is still early days. For example, when we looked at FTSE All-Share companies, we found that while 68% had disclosed net-zero targets, less than 20% had set out steps to decarbonise in a transition plan. Therefore, TPT has aligned with the global approaches of the ISSB and GFANZ to deliver a framework for disclosures that is regulation ready.”

“It is great to see more and more companies announcing their net-zero ambitions, but these are of little use if there is no action or accountability,” commented Amanda Blanc, group CEO of Aviva Group and co-chair of the TPT. 

The framework builds on the global baseline of disclosures developed by the International Sustainability Standards Board and draws on the work of GFANZ. Both are Taskforce members.

“At COP26, then UK chancellor, Rishi Sunak, set out the ambition to make the UK the first net zero aligned financial centre. The TPT’s disclosure framework is a key milestone towards that aim,” said David Schwimmer, group CEO of London Stock Exchange Group, at the launch event from the framework.

“Backing up net-zero ambitions with high quality and clear transition plans is crucial if we are to collectively deliver net zero. The TPT disclosure framework will help businesses understand just what makes a climate transition plan robust and credible.”

Reaction

Tanya Steele, chief executive at WWF, said the release of the TPT’s disclosure framework is an important building block in creating that transition. 

“A future in which we do not address the interlinked climate and nature crises will be a devastating one for business and for the planet, so we need all companies to act. This framework will provide for best practice plans from businesses, setting out their objectives for the net zero transition and how they will achieve them.”

Meanwhile, Matt Scott, executive director at the UK Centre for Greening Finance and Investment, hailed the publication as a “key inflexion point” in the journey to respond to climate-related risks, capture opportunities and accelerate the transition.

“By focusing on a strategic and rounded approach firms can move beyond ‘paper decarbonisation’ and align financial flows with a net-zero economy, not just a net-zero portfolio.”