1st August 2023
On 27 July, the UK Transition Plan Taskforce (TPT) published a status update which announced that seven new sectors would be added to receive additional guidance in sharing their transition plans to net zero, including banking, asset owners and asset management. Other sectors include electric utilities and power generators, food and agriculture, metals and mining, and oil and gas. It also reviewed the results of the consultation on its Disclosure Framework.
What is the Transition Plan Taskforce
The TPT, which was created by the UK Government at COP26 in November 2021 and is led by a Steering Group of private and public sector leaders, has the responsibility of formulating guidelines to assist financial institutions and companies in revealing transition plans.
The TPT is working on a Disclosure Framework, currently in its draft form, which builds on the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB) and draws on and is consistent with the Glasgow Financial Alliance for Net Zero (GFANZ) framework. The Framework makes recommendations for companies and financial institutions to develop gold-standard transition plans. The TPT is also updating the Framework’s Technical Annex, to map its recommendations to other international climate-related disclosure frameworks including the International Standard Board’s and the European Union reporting requirements.
New sectors to receive extra guidance on sharing net zero plans
The TPT carried out a screening process that considered the emissions impact, investment gaps, and the quality of existing guidance in each sector. These specific criteria were chosen to pinpoint sectors that could benefit from additional disclosure guidance to initiate transition plan disclosures effectively. Additionally, the screening process aimed to identify opportunities for incorporating and integrating existing sectoral guidance into the context of TPT’s initiatives. The extra guidance as well as the general guidance covering other sectors will be published in early 2024.
Results of the consultation on the Disclosure Framework
The decision to create sector-specific guidance follows the TPT’s consultation on the draft Disclosure Framework and Implementation Guidance which were published at COP27. The consultation responses were predominantly positive, with approximately 85% of the respondents expressing general agreement or broad agreement with the approach outlined in the draft framework. However, respondents also raised some implementation challenges and called for further guidance. These challenges included the intricacy of creating a comprehensive plan, the navigation of guidance when certain sub-elements might be less applicable to a specific entity’s transition strategy, and limitations regarding available data. Furthermore, some respondents expressed concerns about potential commercial sensitivity and liability risks associated with disclosing certain aspects of their transition strategy.
The TPT plans to release the final version of the Disclosure Framework, along with an updated Technical Annex and a new draft of its generic Implementation Guidance in October 2023. By the end of 2023, the TPT aims to publish draft guidance for the seven key sectors, along with broader signposting guidance. The final versions of both sector-specific and generic Implementation Guidance will be published in the first quarter of 2024.
Meanwhile, the Financial Conduct Authority (FCA) aims to present its plans to consult on disclosures aligned with the TPT’s framework for listed companies as part of a consultation on ISSB S1 and S2 adoption in August. Subsequently, in 2024, the FCA will assess the possibility of strengthening disclosure rules on transition plans in line with its consultation on ISSB adoption.
Furthermore, the UK Government intends to launch a consultation in the Autumn-Winter period on introducing transition plan requirements for the largest companies, including private companies.
More focus on SMEs is needed
The status update did not mention Small and Medium Enterprises (SMEs) given that the Framework solely focuses on the UK’s largest companies. There needs to be collaboration across the economy and the value chain to engage SMEs in the net zero transition and develop credible and trusted transition guidance for small and medium sized businesses.
Bankers for Net Zero are delighted to be chairing the SME Advisory Group for the Transition Plan Taskforce, focused broadly on sustainability reporting and sector specific recommendations to accelerate credible transition plan guidance for SMEs. This will consider guidance for banks on how to engage SMEs on transition plans as well as reporting outputs from our Perseus working groups. Insight from this project will feed into the TPT’s forward looking pathway document, published in Spring 2024 when the TPT comes to the end of its mandate.
If you would like to get involved with this project, please contact the Bankers for Net Zero team.
Elena Pérez Celis,
Head of Policy Public Affairs