Advancing climate transition through disclosure – the UK Transition Plan Taskforce’s gold standard framework

On 9 October 2023, the UK’s Transition Plan Taskforce (TPT) published its final Disclosure Framework (Framework) and guidance. Transition planning and disclosure are key elements of the business contribution to a low carbon and climate-resilient economy. A core purpose of these plans is to “equip investors with the information they need to finance the transition at the speed and scale required”, along with driving internal strategy and action in companies on climate risks and opportunities.

While transition plan disclosures are encouraged for organisations reporting against the current Taskforce for Climate-related Financial Disclosures (TCFD) framework and are required in the International Sustainability Standards Board (ISSB) and EU’s Corporate Sustainability Reporting Directive (CSRD) standards, the TPT’s guidance will help organisations prepare credible and robust climate transition plans for their annual reporting.

The Framework is aligned with the transition plan guidance developed by the Glasgow Financial Alliance for Net Zero so, while it has been designed in the UK, it has “global applicability by design”.

The Framework

As set out in our blog on the TPT’s draft recommendations in 2022, the Framework continues to be focused around three principles: ambition, action and accountability. Within these principles, five disclosure elements emerge:

• Foundations: Disclosure of the ambitions of the organisation’s transition plan, including objectives and priorities for responding and contributing to the transition towards a low greenhouse gas emissions economy and climate-resilient economy (Strategic Ambition). As part of this disclosure the organisation will need to identify the high-level impact that the transition plan will have on its business model and value chain.
• Implementation Strategy: An organisation is required to disclose the actions it is taking within its business operations, products and services, and its policies to achieve the identified Strategic Ambition. The organisation should also identify the implications of these actions on its financial position, financial performance and cash flow.
• Engagement Strategy: Disclosure of the organisation’s engagement with a variety of stakeholders to achieve its Strategic Ambition. The Framework identifies these persons which include the organisation’s value chain, industry, government, public sector, related communities and, more broadly, civil society.
• Metrics & Targets: Similar to existing sustainability disclosure frameworks, the organisation is required to identify metrics and targets being used to drive and monitor progress towards its Strategic Ambition.
• Governance: An organisation must disclose how it is embedding its transition plan into governance structures and the organisation’s arrangements to meet its Strategic Ambition.

Collectively, the Framework contains 19 recommended disclosures against which companies will need to report. The TPT has also published additional guidance on each recommended disclosure.

The TPT has collated summary guidance for 40 sectors on decarbonisation levers and metrics & targets, drawing on existing market guidance, and is welcoming feedback until 24 November 2023. It has also announced that it will consult in November 2023 on ‘Sector Deep Dive’ guidance for seven sectors: Asset Managers, Asset Owners, Banks, Food & Beverage, Electric Utilities & Power Generators, Metals & Mining, and Oil & Gas.

Recognising that preparing transition plans may be challenging for some organisations, the TPT has prepared guidance on the Transition Planning Cycle. Transition planning is dynamic, intended to be revisited and reworked as new information arises or situations change. The TPT has indicated that for best practice, an organisation should revise its plan at least every three years, and report annually on progress made against commitments.

Alignment with TCFD, ISSB and CSRD

Acknowledging that the Framework is the first of its kind globally, the TPT has sought alignment with the TCFD recommendations, ISSB’s standards and the relevant European Sustainability Reporting Standards (ESRS) applicable under CSRD:

• The Framework has been designed to be consistent with the ISSB’s climate standard. For example, they both use the same definition for climate-related transition plans and assessment for materiality. To this end, the TPT considers that the Framework can be used as guidance to help entities report more effectively under ISSB .
• The Framework is designed to complement wider climate-related disclosure requirements based on TCFD. The TCFD recommendations have been integrated into the ISSB climate standard and, as noted above, the Framework recommends what good practice climate transition planning should include.
• Many of the topics covered by the Framework are also within the scope of disclosures in the ESRS general sustainability and climate change standards. The TPT has published a comparison showing the areas of overlap to assist in future disclosure.

The ISSB regards the TPT Disclosure Framework as a useful complement to the ISSB standards, and it may be that this framework is adopted as guidance by the ISSB.

What’s next?

For UK listed companies, the Financial Conduct Authority (FCA) has signalled its intention to consult on requirements for transition plan disclosures  in line with the Framework by listed companies. The requirements are expected to come into force for accounting periods beginning after January 2025. The UK Government has also said it will consult on requirements for large public and private companies to disclose transition plans. The FCA are advising companies to use the Framework now, before mandatory requirements are put in place.