Rishi Sunak announced at COP26 that by 2024 financial institutions and corporations that trade on the London Stock Exchange will be required to develop net-zero transition plans under new Treasury guidelines.[i] The strategies must include targets for reducing greenhouse gas emissions as well as the activities that companies intend to take to achieve those goals. A team comprising industry leaders, academics, regulators, and civil society organisations aims to establish a science-based "gold standard" for the programmes to avoid "greenwashing," or environmental activities that are more about publicity than quality. This regulation is aimed at fostering transparency in climate data reporting to the betterment of climate financing. The Treasury created the Transition Plan Taskforce (TPT) to drive the process.[ii]
The TPT understands that transition plans are necessary for efficient market discipline and the ability of shareholders to hold investee firm boards and management accountable. As a result, the treasury anticipates firm-level transition plans becoming the standard across the UK economy even beyond the mandated plans for London stock exchange listed enterprise. While there is no universally accepted criteria or "template" for what constitutes an effective transition plan, this is evolving. Transition plans have been finalised by the Taskforce on Climate-related Financial Disclosures (TCFD), and investor groups such as Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC) have conducted relevant work.[iii]
The Transition Plan Taskforce will produce recommendations and standards for firm-level transition plans, including generic and sector-specific reporting and indicator standards.[iv] This work must inform the execution of the UK's Sustainability Disclosure Requirements and influence international standard setting by establishing robust criteria and expectations for scientifically evidenced transition plans which, it is claimed by the treasury, will allow the UK to become the world's first net zero-aligned financial centre.
The TPT produced a “call for evidence”, essentially a consultation of the private sector on how the ideal transition plan will look. The consultation sets out a “sector-neutral framework” for transition plans and is comprised of elements to address ambition, target setting, management activities and plans, Internal policies, products and services, engagement: value chains/portfolio, engagement: Public sector, engagement: Industry peers, measurement and monitoring, skills, incentives and accountability, governance, roles and responsibilities.[v] The TPT will consider all written comments in response to the consultation that can be submitted here using the secretariat email, consultation closes on the 13th of July 2022.[vi]
The UK government explicitly state that the TPT will not make firm-level net zero commitments mandatory commenting that “Firms will have different overall targets. A good transition plans sets out these decisions publicly in a comparable way and quantifies the interim targets and milestones to meet the overall firm-level goal”.[vii]
Global Witness, a campaign group with the aim of “Challenging abuses of power to protect human rights and secure the future of our planet” criticised the plans on the premise of privately driven change instead of government investment.[viii]
"Banks and financiers are the lifeblood of the fossil fuel companies and destructive agribusinesses fuelling the climate crisis - so it's right that focus should be on them at COP26. However, today's announcement by banks risks amounting to more greenwashing if it's not legally binding,"- Veronica Oakeshott, head of forests policy and advocacy at Global Witness.[ix]
The director of Green Alliance, Shaun Spiers, also expressed support for public sector funding.
"Private sector investment is vital, but it will be much easier to achieve on the back of serious investment by the chancellor,"
The opinion and insights of experts from across the UK is vital in the pursuit of net zero and specifically in the design of what will be mandatory transition plans, it is therefore of the highest importance that business leaders engage with the consultation process that can be found here.
[i] BBC-COP26: UK firms forced to show how they will hit net zero
[ii] E3G- Transition Plan Taskforce
[iii] Transition Plan Taskforce- Terms of Reference
[iv] Ibid
[v] TPT- A Sector-Neutral Framework for private sector transition plans Call for Evidence
[vi] Ibid
[vii] HM Treasury- Fact Sheet: Net Zero-aligned Financial Centre
[ix] Ibid
Oscar is a recent graduate with a background in earth science. He is currently studying an MSc focussing on disaster responses, emergency planning and community resilience. His postgraduate research project will assess the link between climate crisis risk perception and attitudes to green energy projects. “Adapting to the climate crisis through the pursuit of net zero requires community engagement and understanding. Zero Carbon Academy’s goals closely align with this approach and I’m excited to have the opportunity to research and communicate a variety of topics relating to our environment and sustainability”.
