The UK Treasury has launched a transition taskforce to help firms decarbonise as part of the country’s commitment to become the ‘world’s first net zero-aligned financial centre’.
Building on the work of the Taskforce on Climate-related Financial Disclosures (TCFD), the UK Transition Plan Taskforce will require UK financial institutions and listed companies to develop and publish rigorous and robust transition plans that detail how they will adapt and decarbonise as the UK moves towards a net-zero economy by 2050.
These plans may include the development of sustainability-linked instruments and investor stewardship, as well as financial regulation and corporate strategy.
John Glen, economic secretary to the Treasury and co-chair of the Transition Plan Taskforce, said the taskforce “brings together an impressive range of forward-thinking stakeholders to ensure firms can put together plans to aid our transition to a low-carbon economy”.
Corporate transition plans has been a “key issue” in 2022, according to Michael Izza, CEO of the Institute of Chartered Accountants in England and Wales, who added that after a “whirlwind” of net-zero commitments, “now is the time to understand what the actual implications are in terms of strategy, targets and implementation”.
The UK’s ambition for being a net zero-aligned financial centre was announced last November at COP26, as well as the government’s announcement it will require large companies and certain financial sector firms to publish a transition plan from 2023.
Sacha Sadan, director of ESG at the Financial Conduct Authority, said: “We expect to draw on the Taskforce’s outputs to encourage well-governed and credible transition plans, building on existing TCFD guidance, which we have already integrated into our climate-related disclosure rules for listed companies and regulated firms.”
The taskforce is led by a steering group from the private and public, co-chaired by Glen and CEO of Aviva Amanda Blanc. It is supported by a delivery group of senior experts from across industry, academia and civil society. The Secretariat is provided by the UK Centre for Greening Finance and Investment (CGFI) and climate change think tank E3G.
Tanya Steele, WWF UK’s CEO, said: “Private sector commitments to net zero must be backed up by credible, science-based plans that will underpin the government’s ambition to make the UK the world’s first net-zero finance centre.”
APPG ESG report
The launch of the taskforce comes a week after the UK’s All-Party Parliamentary Group (APPG) on ESG released the findings of its first report, The APPG on ESG’s recommendations on standardising and regulating ESG performance and assessment, and defining impact in the UK.
It recommends harmonising ESG metrics and standard-setting bodies, mandating disclosures and setting up frameworks for responsible divestment, among other suggestions for businesses.
John McCalla-Leacy, partner and UK head of ESG at KPMG UK, a founding sponsor of the APPG on ESG, commented: “We echo the APPG’s calls for government to harmonise ESG metrics, promote mandatory disclosures, and work co-operatively with independent bodies such as the ISSB.”
The full list of recommendations in the report is:
- Harmonising ESG assessment metrics: To work with the government to support attempts to harmonise ESG assessment metrics, with a view to improving comparability, granularity and quality of data.
- Mandatory disclosure: Support the efforts of independent, international bodies, such as the TCFD and ISSB, to enhance mandatory disclosure needed to improve investors’ understanding of a company’s ESG risks and opportunities.
- International bodies and global corporations: Work with independent, international bodies, like TCFD and ISSB, to create ESG-focused guidance designed for global companies, that leverage the power these companies have to transcend borders in ways governments cannot.
- Materiality and improving standardisation: Begin to address the tension between standardisation and materiality in ESG reporting by creating a government-led central register of material ESG concerns facing each sector, promoting qualitative consideration of real-world material impact.
- Avoiding negative impacts through ESG compliance: In instances where progress is made on one element of ESG, regulation should require companies to demonstrate that this does not result in negative impact elsewhere.
- Supporting businesses facing numerous reporting frameworks: Ensure the increasing number of reporting frameworks do not hinder ESG performance by creating resources to support businesses in addressing the question of which is right for them.
- Encourage businesses to help reach net zero: Encourage businesses to play their part in reaching net zero by ensuring UK ESG policy incentivises businesses to state how they are bringing operations in line with the UK’s net-zero commitments.
- Responsible divestment: Develop frameworks for responsible divestment that can be used across markets and tie into current ESG reporting.
- The S in ESG and impact: Promote an understanding that companies have a societal responsibility that extends beyond their own operations.
- Modern slavery: Encourage more transparency in reporting on modern slavery by implementing amnesty periods for companies to address reported modern slavery in supply chains, and by creating a taskforce to support British businesses in identifying and addressing the issue of modern slavery.