UK transition plan disclosures framework finalised

The TPT’s disclosure framework (45-page / 2.9MB PDF) encourages businesses to develop plans on how they will transition to “a low GHG-emissions, climate-resilient economy”, and make a series of disclosures in relation to those plans.

The framework is initially voluntary for businesses to adopt, but it is expected to form the basis of legal and regulatory requirements in the UK in due course. 

Euan McVicar of Pinsent Masons said the final TPT framework is the most considered and well-developed in respect of transition plans, globally. He advised businesses not to delay in considering how they engage with it.

McVicar said: “The launch of the final TPT framework is significant; the direction of travel remains for the requirements to become increasingly mandatory. While the proposals have taken account of consultation responses calling for greater guidance on a number of aspects, the proposals will remain challenging for many, especially those who have only recently engaged or are yet to engage with TCFD disclosures.”

James Hay, a sustainable finance adviser at Pinsent Masons, added: “A sentiment shared by a number of speakers at today’s launch event is that companies should not be viewing transition plans as just another disclosure document but should recognise how the act of transition planning enhances business strategy by helping businesses to capture opportunities and build resilience. Given that transition plans are, for now, voluntary, elevating transition planning to a core component of business strategy provides the imperative to get started – a call to action rooted in good business.”

Under the framework, businesses need to outline the strategic ambition of their transition plans, set out the actions they are taking to achieve that ambition, how they are engaging those in their value chain with their ambition, the metrics and targets they have set to help them monitor progress towards achieving their ambition, and how they are embedding the transition plan within their governance structures and organisational arrangements.

The TPT framework is comprised of representatives from across business, academia, civil society, government and regulators. It was established in the aftermath of COP26 in Glasgow in 2021 and tasked with developing standards in relation to net zero transition plans under the government’s broader green finance roadmap.

While a UK initiative, the TPT’s disclosure framework has been developed with broader international standards in mind – perhaps most notably new standards published by the International Sustainability Standards Board (ISSB) in the summer.

In their foreword to the new framework, co-chairs of the TPT Steering Group, Aviva Group chief executive Amanda Blanc and Treasury minister Baroness Penn, said the TPT framework “has global applicability by design”, citing its alignment with both the ISSB standards and the transition plan guidance developed by the Glasgow Finance Alliance for Net Zero (GFANZ). Sue Lloyd, vice-chair of the ISSB, said the TPT’s framework “provides a practical and useful complement” to the ISSB standards.

In the UK specifically, the government has outlined its plans to consult in the final quarter of this year on making TPT-aligned transition plan disclosures mandatory for largest companies across the economy.

The Financial Conduct Authority (FCA) also plans to mandate TPT-aligned transition plans for listed companies in the first quarter of 2024.

McVicar said: “Reporting of TPT-aligned transition plans looks set to be increasingly mandatory. There had been some concern on this given row-backs on other green policies in the UK. The ability of transition plans to rapidly help organisations respond to climate-related risks and opportunities, decarbonise, and contribute to economy-wide transitions, needs mainstream disclosure. Many will feel that the pace and scope of mandatory requirements are insufficient to be transformational. Others will feel that business already has a maelstrom of disclosure requirements – from TCFD, to ISSB, to CSRD – to grapple with.”

“Given the overall direction of travel, businesses would be well advised to get to grips with the TPT framework. For those who have not yet engaged with TCFD-style disclosures, the leap to a TPT transition plan will be much greater than for those who have been engaging with that framework. When it comes to transition plans, businesses should not let the perfect get in the way of the good, however. It is best to start transition planning even if the TPT gold standard cannot be met right away,” he added.

McVicar said that the significance of the TPT’s work is reflected by the large volume of responses it received to its consultation on its draft proposals from industry and other stakeholders. Pinsent Masons submitted its own response to the consultation following engagement with clients. McVicar said a number of concerns raised by Pinsent Masons had been addressed in the final framework, including the fact that further guidance has been provided on how transition plans should relate to and consider the just transition and nature-related impacts.

In addition to the release of the European Sustainability Reporting Standards (ESRS) comparison and technical mapping against the TCFD recommendations and IFRS S2, the TPT is set to consult on sector-specific guidance in November for publication in early 2024.