On 9 April 2024, the UK Transition Plan Taskforce (TPT) published its final set of resources for businesses, including:
Sector Deep Dives for key sectors
High-level Sector Summary covering a broad range of sectors
Guidance on undertaking a transition planning cycle
A paper on the opportunities and challenges of transition plans in emerging markets and developing economies (EMDEs)
Independent advice from TPT Working Groups on Adaptation, Nature, Just Transition and SME.
In this article
What does this mean?
The TPT was launched by HM Treasury in April 2022 to develop a gold standard for transition plans and make recommendations to inform the UK regulation. The TPT finalised its Disclosure Framework in 2023, and has since been developing additional resources providing technical support for transition plan preparers.
Sector Deep Dives
The Sector Deep Dives focus on helping seven priority sectors (Asset Owners, Asset Managers, Banks, Electric Utilities & Power Generators, Food & Beverage, Metals & Mining and Oil & Gas) interpret the Disclosure Framework, following a consultation period that closed on 29 December 2023. The focus for each sector is outlined below:
- Asset Managers and Asset Owners: financed emissions, investment activities and stewardship. The full range of operations and activities should be addressed, including investment and non-investment activities.
- Banking: financed and facilitated emissions associated with on and off balance sheet activities. The full range of operations and activities should be addressed, including lending, sales and trading, capital markets and advisory activities.
- Electric Utilities & Power Generators, Food & Beverage, Metals & Mining, and Oil & Gas: specific activities for each sector, e.g. electricity generation, transmission and distribution, and electricity retail for the Electric Utilities & Power Generators sector. Not all in-scope activities will be relevant to all entities and so businesses should apply the Deep Dives as appropriate to their specific business model.
Compared with the Deep Dives originally consulted on, some language has been strengthened, e.g. while the draft Deep Dives recommended that organisations “should consider” addressing their full range of operations in their transition plans, the final versions recommend that they “should” do so. There is also some additional detail on interpreting specific aspects of the Disclosure Framework, e.g. the final Asset Manager Deep Dive now contains specific considerations around Strategic Ambition and phase-out plan dependencies under Sub-Element 1.3 on key assumptions and external factors.
Sector summary
The TPT finalised its Sector Summary with high-level transition plan guidance for 30 sectors. This follows on from a consultation that closed on 24 November 2023. Each sector has its own ‘summary’ including key content, e.g. recognised decarbonisation levers, metrics & targets, and key sources of guidance for a transition plan in that sector. In the final version, the TPT has reduced the number of sectors covered from 40 to 30.
Guidance on Transition Planning Cycle
The TPT published sector-agnostic guidance on Transition Planning Cycles The guidance outlines four iterative stages: Re-assess, Set your Strategic Ambition, Plan your Actions, and (Re-)implement your Plan. For each stage, the TPT suggests process steps organisations should consider as they develop and iterate their transition plan, with links to relevant external resources, key internal governance and engagement considerations, examples and case studies.
Additional publications
The TPT published a paper on transition plans in EDMEs providing insights into the potential role of transition plans in supporting transition finance mobilisation.
The TPT also published independent advice from its Working Groups on Adaptation, Nature, the Just Transition, and SMEs. As the Working Groups are independent, this advice is not part of the core suite of TPT documents.
What do firms need to do?
The TPT has published its final set of resources to help businesses prepare and deliver robust transition plans.
Businesses that take a strategic approach to transition planning stand to benefit.
Acting on the TPT recommendations now will prepare businesses for formal regulation further down the line.
Organisations with robust transition plans stand not only to protect value from climate-related risks but also to transform value protection to value creation opportunities.
Businesses should take the following steps to create robust transtion plans:
1. Perform a maturity assessment of their current transition planning against the TPT Framework.
2. Engage with leadership and stakeholders to set your ambition, considering the TPT’s three pillars:
- how to decarbonise
- how to respond to climate-related risks and opportunities
- how planned actions contribute to an economy-wide transition.
3. Develop an implementation roadmap that identifies decarbonisation levers, defines metrics and KPIs, and specifies roles and responsibilities.
4. Ensure accountability for delivery, including monitoring and reporting on progress and assessing approach to internal and external assurance.
The Working Group advice on Adaptation and Resilience will support preparers in producing holistic propositions that consider wider impacts, such as those on the natural environment, stakeholders and society, throughout the process.
The TPT guidance is not intended to be prescriptive, comprehensive, or universal. Ultimately, businesses should prioritise taking a strategic and iterative approach that prepares for strengthened regulation whilst prioritising value protection and creation.
“The TPT outputs are already supporting companies’ efforts to achieve the net zero targets they have set. There is rightly a focus from industry on how formal regulation on transition plans could develop, and the anticipated increase in scrutiny from investors, NGOs, regulators and the public. The TPT’s Framework and latest publications represent a gold standard for firms looking to develop a consistent approach to transition planning that will prepare them for formal regulatory requirements and amplify industry efforts around decarbonisation. Businesses that embrace the TPT’s recommendations will position themselves to capture the opportunities for value creation and preservation presented by the move to a more sustainable economy.”
Next steps
The TPT’s mandate has been extended until at least 31 July 2024 to support the Transition Finance Market Review.
The FCA intends to consult on guidance aligned with the TPT Framework alongside UK Sustainability Disclosure Requirements rules for listed companies in summer 2024.
The Government is expected to consult on transition plan disclosure requirements for UK-registered companies, though this has been delayed from Q4 2023.
Contacts
Hassaan Khan
