Transition Plan Taskforce unveils ‘gold standard’ climate disclosure frameworks for corporates
The Transition Plan Taskforce (TPT) has delivered what it calls a “gold standard” Disclosure Framework for corporate climate transition plans, which aligns with globally recognised reporting frameworks and standards.
The TPT was launched by the Treasury in April 2022, with a pledge that large businesses in high-emission sectors would be subjected to new net-zero disclosure requirements from 2023. The requirement is around net-zero transition plans, which support long-term corporate emissions goals with interim milestones and outline the necessary steps to change business models and investment. Plans should also detail how workers will be supported and the need for upskilling and reskilling addressed.
It issued its first proposal for a ‘gold standard’ for net-zero transition plans six months later. The proposal consists of a framework, recommending how companies should develop plans and the key elements they should include; and an implementation guidance document.
It has today (9 October) unveiled its recommendations aimed at guiding corporate climate disclosure in alignment with globally recognised standards and frameworks.
The TPT states that a company’s transition plan should take a strategic and rounded approach that explains how it will meet climate targets, manage climate-related risks, and contribute to achieving net-zero.
Companies and financial institutions involved in the creation of the Framework as Taskforce members include Aviva, Legal & General Investment Management, London Stock Exchange Group (LSEG), NatWest, and Unilever.
Aviva’s group chief executive and co-chair of the TPT Amanda Blanc said: “It’s great to see more and more companies announcing their net zero ambitions, but these are of little use if there’s no action or accountability.”
“Backing up net zero ambitions with high quality and clear transition plans is crucial if we are to collectively deliver net zero. The TPT Disclosure Framework will help businesses understand just what makes a climate transition plan robust and credible.”
The TPT is proposing that companies should publish one transition plan this year, and then an update in 2026. In 2024 and 2025, information material to the plan should be included in financial reporting.
The TPT outlines how corporates should look across its own impacts, as well as that of the value chain, in terms of climate-related risks and opportunities, and how these can contribute to an “economy-wide” transition to net-zero by 2050.
The TPT recommendations build on the global baseline of disclosures developed by the International Sustainability Standards Board (ISSB) and draws on the work of the Glasgow Financial Alliance for Net Zero (GFANZ). Both are Taskforce members.
In June, the ISSB issued its first two finalised frameworks, with an expectation that the first corporate reports aligned with them will be published in 2025. The two new standards – IFRS S1 and S1 – are climate-focused, but the former also covers other related environmental risks and opportunities.
The TPT Framework provides a set of “Disclosure Recommendations” that a business can use as guidance on how to report more effectively on the transition plan-related aspects of these frameworks to improve disclosures.
The TPT reiterates that its recommendations in creating a Transition Plan should not be seen as separate from what is suggested by the ISSB and the Task Force on Climate-Related Financial Disclosures (TCFD) but rather “provides additional recommendations on what a good practice climate transition” looks like.
In terms of specific recommendations the TPT outlines a five-step process to improving corporate disclosure.
It starts with an “implementation” phase strategy, which states that entities disclose the actions they are taking within their corporate operations, products and services.
This is followed by “strategic ambition” outlines, which document implications for its financial position, financial performance, and cash flows based on climate data.
Step three is the creation on an “engagement strategy” that discloses corporate efforts to engage with the value chains and other members of that sector, including government, public sector, communities, and civil society, which will help inform and achieve the aforementioned Strategic Ambition.
Corporates will also need to disclose the metrics and targets it will use to drive and monitor progress against the Strategic Ambition. An entity will also need to disclose how the transition plan aligns with its governance structures and organisational arrangement.
Earlier this year, the TPT stated it would explore how nature, adaptation and a Just Transition can be included.
© Faversham House Ltd 2023 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.