Transition Plan Taskforce issues Disclosure Framework and consults on sector guidance
11 October 2023
11 October 2023
The UK's Transition Plan Taskforce (TPT) has issued its Disclosure Framework and Implementation Guidance together with a suite of documents including sector guidance. The final versions of the Framework and Implementation Guidance follow the consultation drafts that were published in October 2022.
The accompanying guidance includes:
For an overview of the TPT's November 2022 consultation draft, see our article, The basics of transition planning.
The TPT has said that the final version of the Framework will be recognisable to those familiar with the draft.
The Disclosure Framework builds both on the TCFD Recommendations and also the Glasgow Financial Alliance for Net Zero (GFANZ) guidance on TPs for financial institutions. It sets out the three guiding principles (Ambition, Action and Accountability) and five elements (Foundations, Implementation Strategy, Engagement Strategy, Metrics & Targets and Governance) that make a good TP (see the diagram below).
Source: TPT Disclosure Framework 2023
The TPT considers a credible TP should contain the following elements:
The Implementation Guidance has expanded from the consultation draft and now comprises six documents including guidance on sectors, the transition planning cycle and a comparison of how the Framework relates to key frameworks and standards like the ISSB and ESRS.
The UK government plans to make the production and disclosure of TP's mandatory for large public and private companies based on the TPT's Disclosure Framework. A consultation on the nature and extent of the requirements is expected in Q4 of 2023.
In August 2023 the FCA said it would consult on TP disclosures by listed companies in line with the Framework, alongside its consultation on implementing UK-endorsed ISSB Standards. It is anticipated this consultation will take place in 2024 with a view to these changes taking effect for financial years beginning on or after 1 January 2025 (see Ashurst Governance & Compliance Update Issue 41).
The TPT has worked with several organisations around the world to develop its Framework so it is likely that it will also be used in, and adopted by, other jurisdictions.
The FCA stressed that it had worked as part of the TPT to ensure that the TPT’s recommendations fit with other relevant international initiatives and within the sustainability-related disclosure standards globally. It is expected (although not confirmed) that the FCA's consultation on mandating TP Disclosures, described above, will also include asset managers and FCA-authorised asset owners, mirroring the approach taken with respect to TCFD disclosures.
For most financial services firms, it is unlikely that transition plans will become mandatory. Voluntary disclosure is always available. But such decisions should be taken in light of the new anti-greenwashing rule that will come into force on the FCA's publication of its policy statement on Sustainability Disclosure Requirements which is expected in Q4 2023.
At the launch event on 9 October 2023, Amanda Blanc, CEO, Aviva and Co-Chair of the TPT spoke about how to embed transition planning into corporate reporting and culture. She urged all companies to use the Disclosure Framework alongside other companies and in their supply chains. Banks and other investors should use the Framework with investee companies and borrowers.
The TPT Framework states: "disclosure must not be viewed by businesses as merely a compliance exercise. Transition plans form a critical component of a firm’s business strategy – helping to explain to their customers, shareholders and investors how they will adapt and grow as the global economy transitions to net zero."
The TPT Framework and supporting documents considerably advance the sustainability disclosure ecosystem. Their use will result in a giant leap towards understanding the climate-related risks and opportunities that the corporate world is subject to.