The Transition Plan Taskforce (TPT) has launched its best practice disclosure framework for climate transition plans to enable businesses and financial institutions to play their part in the shift to a net zero climate.
Aiming to help companies and financial institutions create consistent, comparable corporate reports on climate transition plans, and reduce the complexity of disclosure that companies face, the launch comes after a short consultation period in which financial companies and real economy companies input was asked about The Future.
The disclosure framework, created by financial institutions including Aviva, Legal & General Asset Management, LSEG and NatWest, and announced this morning (October 9) on the London Stock Exchange, encourages companies to implement a transition plan that takes a strategic and rounded approach to explain how it will meet climate targets, manage climate-related risks and contribute to net zero, through the principles of ambition, action and accountability.
The framework also provides the basis for companies to draw up credible and robust transition plans as part of annual reporting on future business strategy. Based on the transition plan components identified by the Glasgow Financial Alliance for Net Zero (GFANZ), TPT has set out five key elements of a ‘good practice’ transition plan.
First, an entity must disclose the strategic ambition of its plan, including objectives and priorities to contribute to the transition to a climate-resilient economy with low greenhouse gas emissions. This could include disclosing the implications the transition plan will have on their business model and value chain, as well as the key assumptions and external factors on which the plan depends.
Recommended disclosures for individual entities also include implementation and engagement strategies across the business operations and value chain; metrics and objectives they use to monitor progress towards their strategic ambition; and the evidence on the transition plan is embedded in the governance structures and organizational arrangements.
TPT Disclosure Framework
According to TPT, this provides the ‘gold standard’ for disclosure of transition plans, which can be applied voluntarily but are also ready for application in domestic regulations.
In addition to the Disclosure Framework, additional guidance has been published for transition plan preparers and users, including guidance on the climate transition planning cycle, technical maps and comparisons between the Disclosure Framework and other reporting frameworks, and legal considerations for companies preparing reports using the Disclosure Framework. .
“We have seen good progress on climate disclosures in the UK and internationally, but it is still in its early stages. For example, when we looked at FTSE All-Share companies, we found that while 68% had announced net zero targets, less than 20% had set out steps to decarbonise the economy in a transition plan. That is why TPT has joined the global approach of the ISSB and GFANZ to provide a regulatory-ready disclosure framework.”
“It’s great to see more and more companies announcing their net-zero ambitions, but these will be of little use if no action or accountability is taken,” said Amanda Blanc, group CEO of Aviva Group and co-chair of the TPT.
The framework builds on the global baseline of disclosures developed by the International Sustainability Standards Board and draws on the work of GFANZ. Both are members of the Task Force.
“At COP26, then British Chancellor Rishi Sunak set out the ambition to make Britain the first net-zero financial centre. The TPT disclosure framework is an important milestone towards that goal,” said David Schwimmer, group CEO of the London Stock Exchange Group, at the launch of the framework.
“Supporting net zero ambitions with high-quality and clear transition plans is crucial if we are to collectively achieve a net zero policy. The TPT disclosure framework will help companies understand what makes a climate transition plan robust and credible.”
WWF CEO Tanya Steele said the release of the TPT disclosure framework is an important building block in creating that transition.
“A future where we fail to address the interconnected climate and nature crises will be devastating for business and the planet, so we need all businesses to act. This framework will provide best practice plans for companies, setting out their net zero transition objectives and how they will achieve them.”
Meanwhile, Matt Scott, executive director of the UK Center for Greening Finance and Investment, called the publication a “major turning point” in the journey to respond to climate-related risks, seize opportunities and accelerate the transition.
“By focusing on a strategic and rounded approach, companies can move beyond ‘paper decarbonisation’ and align financial flows with a net-zero economy, not just a net-zero portfolio.”