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Key sectors to get extra guidance on transition planning

Author: ICAEW Insights

Published: 31 Jul 2023

Asset management, banking and energy are among sectors that will receive additional guidance on creating and disclosing climate transition plans, confirms Treasury taskforce.

The UK Transition Plan Taskforce (TPT) is tasked with developing standards to support financial institutions and companies in preparing and disclosing transition plans – which detail how an organisation aims to manage the impacts of climate change and the move to net zero.

In a status update published on 27 July, the TPT confirmed its final Disclosure Framework will be published in October, with final generic Implementation Guidance and additional sector-specific support following in 2024.

Reacting to the announcements, ICAEW’s Head of Corporate Reporting Strategy, Sally Baker, said: “We believe asking entities to consider how their actions contribute to the UK’s net-zero target, and to disclose their plans, will help drive ambition and action.

“We look forward to seeing the final Disclosure Framework in October 2023 and stand ready to contribute further to this important work.”

Sector-specific support

The decision to create sector-specific guidance follows TPT’s consultation on the draft Disclosure Framework and Implementation Guidance which were published at COP27. In its status update, TPT confirms that it had responses from 500 organisations, including ICAEW which has representatives on TPT’s steering and delivery groups.

In response to feedback asking for case studies and further support, TPT will be producing two sets of additional guidance. The first will look to support a wide range of sectors and will signpost existing guidance from third parties. The second will focus on providing more support for seven key sectors that can play a key role in reducing global greenhouse gas emissions:

  • asset management,
  • asset owners,
  • banking,
  • electric utilities and power generators,
  • food and agriculture,
  • metals and mining, and
  • oil and gas.

International alignment

In line with ICAEW’s feedback, the TPT has confirmed it will be working over the coming months to ensure that language in the framework is aligned with existing international frameworks, including the ISSB’s recently published standards, IFRS S1 and S2.

TPT is also updating the Framework’s Technical Annex, to map its recommendations to other international climate-related disclosure frameworks: “This will include the TCFD's November 2021 Recommendations, the IFRS S2 Climate-related Disclosures Standard, and, depending on the finalisation timeline, EU reporting requirements.”

Welcoming the changes, Baker, said: “As strong supporters of the efforts of the TPT, we are pleased to see the response to feedback.

“Interoperability of sustainability reporting frameworks is a key factor in their success, and we particularly welcome steps that TPT have taken to improve the alignment of their Disclosure Framework with the ISSB’s first IFRS Sustainability Disclosure Standards.”

Adopting corporate reporting norms

Consultation responses were generally positive with 85% of respondents broadly agreeing or agreeing with the approach taken in the draft framework.

According to the TPT, more than half of preparers also agreed with the recommendation that entities should integrate material information on their transition plans into general purpose financial reporting, as well as publishing a standalone plan that is updated periodically.

It also reported strong support for its recommendation that entities should apply key corporate reporting norms to transition plan reporting.

Respondents did suggest, however, that additional guidance would be welcome in areas including what information should appear in the standalone plan as distinct from annual financial reports.

Timelines for publication and exploring mandation

In its status update, the TPT outlined timelines for the publication of its Disclosure Framework and Implementation Guidance, as well as activity from UK policymakers exploring the potential of mandating the standard in future.

In October, the TPT will be publishing the final Disclosure Framework, alongside its updated Technical Annex and a new draft of its generic Implementation Guidance.

By the end of  2023, the TPT plans to publish draft guidance for the seven key sectors as well as its broader signposting guidance. Final versions of both these guides plus the generic Implementation Guidance will be published in Q1 of 2024.

Meanwhile, the Financial Conduct Authority (FCA) is due to set out its plans to consult on TPT-aligned disclosures for listed companies as part of a consultation on ISSB S1 and S2 adoption in August. In 2024 the FCA will then consider strengthening disclosures rules on transition plans as part of its consultation on ISSB adoption.

The UK government is also set to launch a consultation this Autumn-Winter on introducing transition plan requirements for the largest companies, including private companies.

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