On the 9th of October the TPT (Transition Plan Taskforce) revealed their proposal for a so-termed ‘gold standard’ framework for climate disclosures. As we reported last year[i], by 2024 financial institutions and corporations that trade on the London Stock Exchange will be required to develop net-zero transition plans under UK Treasury guidelines. The strategies must include targets for reducing greenhouse gas emissions, as well as the activities that companies plan to conduct in order to achieve those goals.
The primary aim for the TPT was to produce recommendations and standards for firm-level transition plans, including generic and sector-specific reporting and indicator standards. At the centre of the project was the requirement for it to inform the execution of the UK's Sustainability Disclosure Requirements. Additionally, it was hoped it would influence international standard setting by establishing robust criteria and expectations for scientifically evidenced transition plans which, it was claimed at the time by the treasury, would allow the UK to become the world's first net zero-aligned financial centre. To address these requirements, the TPT produced a “call for evidence”, essentially a consultation of the private sector to build an ideal transition plan.
Having completed its research, the TPT has now revealed its proposal, which includes design for a best practice disclosure framework that includes 5 key principles as follows:
1. Foundations: Disclosure by the entity of the objectives and priorities for responding and contributing to the transition, setting 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. Within this section the entity should also disclose the high-level implications that this transition plan will have on its business model and value chain.
2. Implementation Strategy: Disclosure of the actions to be taken within the businesses 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: Disclosure of how the entity is engaging with its value chain, industry peers, government, public sector, communities, and civil society.
4. Metrics & Targets: Disclosure of the metrics and targes that the entity is using to drive and monitor progress towards its strategic ambition.
5. Governance: Disclose of how the entity is embedding its transition plan within its governance structures and organisational arrangements to achieve the strategic ambition of its transition plan.[ii]
To help develop TPT’s disclosure framework, the project has been designed to be consistent with, and to build upon, the IFRS S211 climate-related standard issued by the International Sustainability Standards Board (ISSB). IFRS S2 includes several provisions that are relevant to transition planning.
IFRS S1, and IFRS S2 were launched In June this year, with the ISSB launching its first climate-related disclosure in response to what it calls a global demand for a ‘global language of sustainability-related disclosures aimed at meeting investor information needs’. The first corporate reports aligned to these ISSB standards are expected in 2025. Discussing the more recent TPT proposals Sue Lloyd, Vice chair of the International Sustainability Standards Board (ISSB) has said:
“We welcome steps taken by the Transition Plan Taskforce to ensure this framework is consistent with the ISSB Standards and the Taskforce’s strong support for the vision of a global baseline of climate-related disclosures, which will provide much needed consistency and comparability for investors and enable companies to communicate with existing and potential investors.”[iii]
She adds that it (the TBT proposal) provides “a practical and useful complement to our Standards. It will be a useful tool for companies in developing their transition plans and informing the disclosure requirements in IFRS S2.”[iv]
Also factored into TBT’s proposal is the work undertaken by GFANZ. The Glasgow Financial Alliance for Net Zero (GFANZ) was founded in April 2021 as a global coalition of financial institutions who are committed to supporting the transition to net zero by 2050, and presently consists of more than 650 firms across 50 countries. Mary Schapiro, Vice-Chair of GFANZ has been quoted in TPT’s framework as saying:
“It is encouraging that policymakers in a growing number of jurisdictions are recognising the importance of transition plans. Net-zero transition is a common global challenge being addressed by jurisdictions that rely on global finance, companies with global supply chains, and financial institutions that can channel finance cross-border to deliver the greatest decarbonisation impact. The need for global convergence on what constitutes credible, comprehensive, and consistent transition planning disclosures could not be greater.”[v]
It is worth noting that the TPT states that its transition should not be seen as separate from what is suggested by the ISSB, instead it “provides additional recommendations on what a good practice climate transition” looks like.
[ii] TPT_Disclosure-framework-2023.pdf (transitiontaskforce.net)
[iii] Ibid
[iv] Ibid
[v] Ibid
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
