On October 31, 2024, the UK Transition Plan Taskforce (TPT) wrapped up its work and released a final report detailing its accomplishments and future outlook.
This blog will summarise 5 points from their final report.
High expectations were met
The Transition Plan Taskforce (TPT) was announced at COP26 in Glasgow in 2021 to establish the gold standard for transition plan disclosures - not a small undertaking!
The TPT Disclosure Framework was published in October 2023, setting out good practice for credible transition plans disclosures across all sectors of the economy.
In April 2024, the TPT published a further set of sector guidance, implementation guidance and advisory papers on nature, just transition and adaptation. The high level of their thought leadership materials have been praised and appreciated across sectors.
In 2023, over 5,900 companies reported through CDP that they have a 1.5°C-aligned climate transition plan in place, an increase of 44% from 2022. Additionally 8,600 companies reported their intention to develop a climate transition plan in the next two years.
Lloyds Bank in their 2024 'Credible Transition Plans: Reporting vs Reality' report published the results of a survey of 100 UK Director-level executives (at companies with at least £100 million annual revenue) which found that:
80% of companies surveyed have transition plans.
The majority of investors (68%) surveyed believe that a company’s transition plan is important when considering making an investment, with 26% describing it as “very important”.
This is huge progress in a few very short years.
Global commitments are positive but need consistency
The new UK government, elected in July 2024, made a manifesto commitment to make the UK the green finance capital of the world and to require large companies and financial firms to develop and implement credible transition plans.
Many other countries have made great progress in adaptation. In China, for example, the three major stock exchanges (Shanghai, Shenzhen and Beijing) have published sustainability reporting guidelines for the largest listed companies which include climate transition plan disclosures.
With all eyes on America and what might happen next, it's worth noting the “Principles for Net-Zero Financing & Investment” published by the US Treasury in 2023 which sets out transition plan expectations, including reference to the TPT Disclosure Framework.
The report highlights that it's vital to further increase global consistency in transitional planning norms and expectations. The Global Capacity Building Coalition is working to streamline access and enhance effectiveness of climate capacity building, with a focus on financial institutions, emerging markets and developing economies.
Ambition, Action, and Accountability
The TPT recommends that entities follow three guiding principles – Ambition, Action and Accountability – in designing their climate transition plan.
In setting its Strategic Ambition, the TPT recommends that an entity take a strategic and rounded approach, considering three inter-related channels:
Decarbonising the entity by reducing its GHG emissions in its own operations and in its value chain
Responding to the entity’s climate-related risks and opportunities, including its ambitions and actions to enhance its resilience to the changing climate and responding to climate-related risks and opportunities.
Contributing to an economy-wide transition, for example by providing products and services needed to embed and accelerate a transition to a low-GHG emissions and climate-resilient economy.
However, as the final report states, it's crucial that the plan is actually integrated into different levels of decision-making.
'One plan, many users'
One Plan, Many Users is a foundational concept of the TPT Disclosure Framework, highlighting that a single, strategic transition plan can serve many purposes, and bring together stakeholders from across functions.
''Evidence increasingly suggests that transition planning can deliver significant benefits for companies, including supporting firm-level emission reductions, increasing competitiveness and reducing the cost of debt.
C-Suites and boards should engage with the resources developed by the TPT and should take steps to ensure that their transition plans are embedded into organisational strategy, governance, and corporate functions from finance to procurement.''
Investors and lenders are key players in this area as well. Transition plans are increasingly important to investment decisions, and are particularly important for the allocation of transition finance, enabling risk assessment and risk pricing.
Transition plans are crucial to policymakers and regulatory authorities in understanding transition trajectories and informing decision-making.
It's important that there is clear and sustained communication between all these parties.
''As market adoption of transition plans grows, more attention will need to be paid to establishing an information feedback loop between private sector transition planning and policymaking.
The TPT Disclosure Framework recommends that companies disclose key assumptions and external factors on which their transition plan depends. Many of these external factors are directly (e.g. regulatory frameworks like carbon pricing) or indirectly (e.g. availability of skilled workers) related to government policy.''
What's next?
The International Financial Reporting Standards (IFRS) Foundation is assuming responsibility for the TPT’s disclosure-specific materials. These materials are available on the IFRS Sustainability Knowledge Hub.
During the New York Climate Week, the new International Transition Plan Network (ITPN) was launched. It will act as a collaborative platform, bringing together official sector actors with a wider community of practice to continue advancing transition planning.
There is not much information available on their website yet, but we know that it's a membership-based network that plans to support the development of private-sector transitional plans and drive national climate policies worldwide.
Dame Amanda Blanc, the TTP Steering Group Co-Chair said:
''When we began, transition plans were a little-known topic. Today, they have become the market norm, with the power to help reshape how businesses and financial institutions approach the net zero transition.''
The TTP's work has certainly been impressive and influential and we look forward to seeing how the agenda develops going forward.
You can read the full report here.
Deloitte, Corporate Reporting Insights 2024
Lloyds, Credible Transition Plans: Reporting vs Reality, 2024
https://www.lloydsbank.com/assets/assets-business-banking/pdfs/credible-transition-plans.pdf
Guidelines No. 14 of Shanghai Stock Exchange for Self-Regulation of Listed Companies—Sustainability Report (Trial)
https://english.sse.com.cn/news/newsrelease/c/10753174/files/5a3884ca89cd434bb34ab39dd539f8e7.pdf
U.S. Department of the Treasury, “Principles for Net-Zero Financing & Investment”, 2023
https://home.treasury.gov/system/files/136/NetZeroPrinciples.pdf
Labour, Financing Growth: Labour's plan for financial services
https://labour.org.uk/wp-content/uploads/2024/01/Financing-Growth.pdf
University of Oxford, A framework for assessing and managing dependencies in corporate transition plans. 2024
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