UK Government Consultation on Transition Plan Disclosures for Financial Services – What Does This Mean for Financial Services?

Introduction

On 26 June 2025, the UK Department for Energy Security & Net Zero (DESNZ) launched a consultation on the development of a UK framework for transition plan disclosures (TPDs). The proposals form part of the Government’s broader Sustainable Disclosure Requirements (SDR) regime and are aligned with the UK’s ambition to become the world’s first net zero-aligned financial centre.

The consultation seeks views on a number of policy design and implementation issues concerning the development, content, and regulatory treatment of transition plans, with a particular focus on financial institutions.

We set out below an overview of the consultation’s key themes and potential implications for financial services clients. Please refer to our wider briefing here for further detail on the proposals and their broader application.

Will the TPDs apply to all financial services firms?

The exact scope of the TPD requirements form part of the consultation.

However, the consultation highlights the government's manifesto commitment in terms of the scoping of the TPDs to financial institutions and blue-chip companies. The proposed TPDs are also expected to be linked to the existing SDR, meaning firms subject to SDR will likely be in-scope. However, the consultation also highlights the government's commitment to lower regulatory burdens on business, and makes clear that the TPDs will be focused on "economically significant" firms, with SMEs expected to be out of scope. We therefore expect the following firms are most likely to be impacted:

• Banks
• Asset managers: noting we expect fund managers to be impacted. There is doubt over whether portfolio managers will be scoped in following the FCA's recent reversal on its proposal to extend the SDR to portfolio managers.
• Asset owners: including insurers and pension funds.
• Blue-chip companies: i.e. companies listed on the FTSE 100.

Will transition plans be mandatory for in-scope firms?

The consultation outlines three potential implementation pathways for introducing transition plan disclosures:

What are the key areas of TPDs being consulted on?

The consultation is structured around the following key topics:

1. Policy Objectives and Use Cases

Transition plans are seen as a tool to promote market-wide alignment with net zero targets and to support efficient capital allocation. DESNZ also seeks views on the intended users of transition plans (e.g. investors, regulators, customers) and how disclosures can be made more decision-useful.

2. Applicable Standards

The consultation considers adopting standards set by the (i) Transition Plan Taskforce (TPT) Disclosure Framework and/or; (ii) the UK Sustainability Reporting Standards S2 (UK SRS) as the starting point for minimum content requirements. Views are invited on the utility of these frameworks and whether this should be supplemented with sector-specific guidance or additional regulatory expectations.

3. Implementation Pathways

A key focus is how and when TPDs should be mandated, as well as whether an additional legal requirement should be imposed on in-scope companies to implement their transition plans. Three broad implementation options are proposed (which we set out below). DESNZ is also seeking views on how to ensure international consistency, including alignment with ISSB and EU standards.

4. Net Zero Alignment

The consultation invites views on the ambition and content of transition plans. In particular, it seeks views on whether transition plans should be aligned with net zero by 2050, should seek to implement changes in relation to climate adaptation and resilience, and/or whether transition plans should seek alignment with nature targets as well as climate.

5. Legal Liability

Transition plans are often underpinned by information, data, estimates and assumptions that are outside the control of the reporting entity. DESNZ therefore also seeks stakeholder views on the level of legal risk associated with the publication of transition plans and whether changes to the law are required.

What is typically disclosed in a transition plan?

Whilst the consultation paper does not identify the content of the TPDs, we consider the final content of the disclosures is likely to broadly mirror the TPT Framework, which has already been published (please refer to our previous briefing on this).

What are the implications for financial services firms?

Financial institutions are likely to be among the first entities in scope for any mandatory transition plan disclosure regime. The proposals may have the following implications:

• Enhanced disclosure requirements: firms (especially those subject to existing TCFD or SDR rules) should anticipate an expansion in the granularity and scope of required disclosures.
• Increased governance expectations: boards will be expected to oversee transition planning and may need to establish new internal controls or reporting lines. A Senior Manager of the firm will likely need to be appointed to oversee the production and implementation of transition plans.
• Investor and regulatory scrutiny and reputational risk: Transition plans will increasingly be used by investors, regulators and stakeholders to assess credibility and climate alignment.
• Stewardship approaches: financial institutions (particularly asset managers) will need to consider how they factor in requirements under the TPD rules into their stewardship approaches in respect of portfolio assets.
• Business model considerations: financial institutions with significant exposures to high-emitting sectors should to consider the viability of their current business models in a worst-case scenario and whether there are ways to diversify their client base.

Ashurst has developed a Transition Plan Assessment Tool to enable our clients to develop credible and comprehensive transition plans.

What is the timeline and next steps?

The consultation is open until late summer 2025. A policy statement will follow later in the year, with legislative or regulatory measures potentially introduced thereafter.