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New ‘gold standard’ for climate transition plans

Author: ICAEW Insights

Published: 08 Nov 2022

HM Treasury’s UK Transition Plan Taskforce launches its Disclosure Framework and Guidance for the private sector at COP27 in Egypt.

A Treasury-backed taskforce charged with helping UK-based private sector organisations develop net zero transition plans has launched a Disclosure Framework at COP27 in Egypt this week. It aims to help connect momentum on net zero commitments from private sector firms with the need for good-quality, accurate and decision-useful information for investors.

The UK Transition Plan Taskforce (TPT) was announced last year at COP26 by the Chancellor as part of the UK’s plan to become the world’s first net zero financial centre. It has a two-year mandate from HM Treasury to provide financial institutions and companies with the tools they need to create rigorous transition plans to fulfil their net zero commitments.

TPT says high-quality and credible plans create transparency and accountability for companies and financial institutions to meet their net zero targets and will enable investors to make better informed capital allocation decisions.

The Disclosure Framework emphasises the need for concrete, short-term action by companies and financial firms across the economy. It also urges companies and financial firms to consider the full range of levers at their disposal to contribute to, and prepare for, an economy-wide transition to net zero to help avoid potential unintended consequences of ‘paper decarbonisation’.

Meanwhile, accompanying Implementation Guidance sets out the steps to develop a transition plan, as well as when, where and how to disclose their plan, and a sandbox allows companies and financial institutions that are preparing transition plans to provide feedback on their experiences in applying some or all of the TPT’s Disclosure Framework and Implementation Guidance.

The Taskforce is co-chaired by Amanda Blanc, Group Chief Executive Officer at Aviva, and Andrew Griffith MP, Economic Secretary to the Treasury. ICAEW Chief Executive Michael Izza sits on the TPT’s steering committee and Richard Spencer, ICAEW’s Director of Sustainability is part of its delivery group.

Michael Izza said: “The TPT’s Disclosure Framework and Implementation Guidance can play a key role in equipping UK plc, including professional services, with the tools and knowledge needed to deliver on net zero commitments. The Implementation Guidance crucially covers how to report consistent, comparable and decision-useful information in transition plans, as well as how often and where to disclose transition plans.”

Amanda Blanc said the time had come for private companies to demonstrate their plans for turning the net zero ambitions into reality: “Transition plans are a key building block for delivering a net zero future. This is why the work of the TPT is so important. Building on the excellent work from the Glasgow Financial Alliance for Net Zero (GFANZ) and the International Sustainability Standards Board (ISSB), the TPT Disclosure Framework will help ensure that everyone has a consistent understanding of what is needed.”

Mardi McBrien, Managing Director, International Sustainability Standards Board, said: “We welcome the work of the Transition Plan Taskforce (TPT) to drive robust and credible transition plans from finance and real economy actors. The TPT’s Framework and Guidance builds on the ISSB’s Climate Exposure Draft by providing further recommendations on transition plans for the UK context. The ISSB is pleased to sit on the steering group of the TPT and work towards global converge and standardisation on transition plans.”

The Disclosure Framework and Implementation Guidance are open for public consultation until 28 February 2023 and the TPT will use the consultation and sandbox feedback to finalise the Disclosure Framework and Implementation Guidance.

The framework will also inform future regulation in the UK; over the next two years, the Financial Conduct Authority (FCA), which sits on the TPT steering group and delivery group, will draw on the TPT’s outputs to strengthen future disclosure rules for listed companies, asset managers and regulated asset owners.

In January 2022, the FCA introduced rules for listed companies and large regulated asset owners and asset managers to disclose transition plans as part of its Task Force on Climate-Related Financial Disclosures (TCFD)-aligned disclosures, initially on a comply-or-explain basis. The first disclosures under these rules will be made in 2023. The TPT’s outputs will support UK firms and companies to publish high-quality plans under existing rules.

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