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TPT publishes guidance on securing transition finance

Author: ICAEW Insights

Published: 11 Apr 2024

Expert body’s final batch of advice provides companies in every sector with insights on how to attract investment to support their journey to net zero.

A comprehensive array of free online resources to help companies build transition plans and secure transition finance has been published by the Transition Plan Taskforce (TPT).

The guidance papers cover 30 economic sectors and provide detailed advice on how to undertake a transition-planning cycle. They also include detailed advice for seven critical areas of the economy: asset ownership, asset management, banking, electric utilities and power generators, the food and beverage sector, metals and mining and oil and gas.

To provide further context, the TPT has also included advisory papers from its working groups on adaptation, just transition, nature and SMEs.

Together, the materials comprise the TPT’s final batch of advice to the business community, following publication last October of its formal Disclosure Framework.

Tomorrow’s solution

On Thursday, delegates who had helped to shape the guidance joined senior TPT figures for a special launch event in London where leading voices in transition finance – plus business leaders whose companies have embarked on ambitious transition journeys – provided their thoughts on best-practice approaches.

Speaking at the event, Helen Dean, CEO of pensions provider the National Employment Savings Trust (NEST), said a credible transition plan must have three elements:

  • short-term milestones to support long-term goals;
  • fully costed actions to show stakeholders how the plan will be achieved; and
  • clarity on dependencies – or where the plan’s success is contingent on things happening outside the business.

Dean said its analysis had found that three-quarters of NEST’s 13 million members have said that they expect the business to invest sustainably. In total, the organisation provides between £500m and £600m of finance per month – and would only divest from a prospect as a last resort. “You may save yourself grief,” she said, “but you haven’t solved the global problem. That investment could be picked up by someone who cares less and isn’t as engaged.”

Dean stressed that transition plans help investors see past what may look like red flags and instead focus on a company’s true intentions. “We invest in the German chemical company Linde, which is one of the highest emitters in our portfolio. But if you look at their transition plan, you see that they’re investing $1bn in low-carbon hydrogen and have pilot plants up and running. They may be today’s problem – but they’re part of tomorrow’s solution. With a transition plan, we can invest much more intelligently.”

Lloyds Banking Group Managing Director, Sustainability and ESG Finance, Jonas Persson said that his institution’s transition plan is driven by authenticity. That means being completely transparent with clients and suppliers about how it works. “Emissions from our supply chain are eight times more than those from our own operations – so, much more material,” he said. “By really leaning into those relationships, we can make a big difference.”

Jon Stanton, CEO of mining equipment maker Weir Group, urged businesses to focus on progress rather than perfection. “We’re all trying to do the best thing here, so the data is going to be imperfect. 

“But over time, the more we understand this – and the more we systemise, automate and get assurance – the better it will be. Over the five or six years we’ve been doing this, we’ve learned a huge amount. Is it perfect? No. But is it getting better? And is the assurance industry there and supportive? Yes.”

Systemic approach

Speaking ahead of the event, TPT Secretariat Co-Head Dr Ben Caldecott said there was a need to back up net-zero targets with firm plans. “Climate transition plans, if suitably ambitious and delivered with appropriate actions and with proper accountability, can help society allocate capital to companies and assets that are actually contributing to meeting the aims of the Paris Agreement, and away from those that aren’t.”

Fellow Secretariat Co-Head Kate Levick said amid international momentum for transition finance, transition plans are increasingly seen as a key tool. “The G7, G20 and UN Secretary General, regulators in other jurisdictions and users of market information support the development of consistent transition plans to inform decision making and investment. Companies should make a start now rather than risk being left behind.”

ICAEW Director, Sustainability, Richard Spencer said: “With this latest suite of materials, we now have an impressive and comprehensive framework, together with a substantial battery of guidance on transition planning. 

“I am also delighted to see the additional advisory papers on adaptation, just transition, nature and transition planning for SMEs. They recognise that we cannot think of climate alone, but must take a systemic approach to the crisis.”

The framework and new resources wrap up the first phase of the TPT’s work since its launch in April 2022. Following an HM Treasury decision to extend its mandate, the TPT will now focus on supporting the UK’s Transition Finance Market Review.

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