Guiding principles of UK’s Transition Plan Taskforce disclosure framework

The UK’s Transition Plan Taskforce’s (TPT) Disclosure Framework provides a ‘gold standard’ framework for climate transition plans to enable companies to play their part in the shift to net zero, and identifies the guiding principles and key elements of a good practice transition plan.

The TPT said: “The world urgently needs to make an orderly transition to a low-greenhouse gas (GHG) and climate-resilient economy… To meet this challenge, a fundamental transformation in business and finance is required. Transition planning and the disclosure of transition plans are core to this transformation.”

Amanda Blanc, group CEO Aviva Group, co-chair, Transition Plan Taskforce, said: “It’s great to see more and more companies announcing their net-zero ambitions, but these are of little use if there’s no action or accountability. Backing up net-zero ambitions with high-quality and clear transition plans is crucial if we are to collectively deliver net zero. The TPT Disclosure Framework will help businesses understand just what makes a climate transition plan robust and credible.”

According to the TPT, the framework applies three guiding principles of ambition, action and accountability in order to drive good practice. “The TPT recommends that, in setting its strategic ambition and designing its transition plan, an entity take a ‘strategic and rounded’ approach. That is, the entity should consider the actions that it can take now to capture opportunities, minimise future risks and protect and enhance its long-term value,” the framework says.

It adds that a transition plan should translate ambitious objectives and priorities into concrete steps to be taken in the short, medium and long term, and should emphasise in its disclosure a roadmap of planned actions that will contribute to meeting its strategic ambition. And delivery of a transition plan should be fully integrated into the entity’s organisational processes for business and financial planning, and for governance.

The framework states: “An entity should define clear roles and responsibilities for the delivery and oversight of its transition plan and should take steps to align culture and incentive structures with the strategic ambition set out in the plan.”

The TPT has set out the five key elements of a good practice transition plan:

1. Foundations: An entity shall disclose the strategic ambition of its plan. This shall comprise the entity’s objectives and priorities for responding and contributing to the transition towards a low-GHG emissions, climate-resilient economy, and set out whether and how the entity is pursuing these objectives and priorities in a manner that captures opportunities, avoids adverse impacts for stakeholders and society, and safeguards the natural environment. Under this element, an entity should also disclose the high-level implications that this transition plan will have on its business model and value chain, as well as the key assumptions and external factors on which the plan depends.
2. Implementation strategy: An entity shall disclose the actions it is taking within its business operations, products and services, and policies and conditions to achieve its strategic ambition, as well as the resulting implications for its financial position, financial performance, and cash flows.
3. Engagement strategy: An entity shall disclose how it is engaging with its value chain, industry peers, government, public sector, communities, and civil society in order to achieve its strategic ambition.
4. Metrics & targets: An entity shall disclose the metrics and targes that it is using to drive and monitor progress towards its strategic ambition.
5. Governance: An entity shall disclose how it is embedding its transition plan within its governance structures and organisational arrangements in order to achieve the strategic ambition of its transition plan.

Baroness Penn, treasury Lords minister and co-chair of the Transition Plan Taskforce, said: “Under our COP26 leadership, the government set out our vision for the UK to be the world’s first net-zero aligned financial centre. Launched only in April 2022, the Transition Plan Taskforce has now delivered on its core mandate to develop a framework for private sector climate transition plans. As we move towards meeting net zero in a pragmatic and proportionate way, we recognise the value of the transparency and accountability offered by transition plans that help firms in their own journey.”