At COP26, the UK government announced the creation of the Transition Plan Taskforce (TPT), as part of its plans to become the world's first net zero financial centre. The TPT has a two year mandate to develop a disclosure framework and implementation guidance for transition plans and has now issued a framework, implementation guidance and technical annex for consultation.

The sector-neutral framework proposes high quality disclosures for transition plans and builds on the work of the International Sustainability Standards Board (ISSB), the Taskforce for Climate-Related Financial Disclosures (TCFD) and the Glasgow Financial Alliance for Net Zero (GFANZ).

The consultation will close in February 2023. A sector mapping exercise will follow, with initial Sector Guidance and final Disclosure Framework and Implementation Guidance expected in summer 2023. Final Sector Guidance will be published in autumn/winter 2023.

Both TCFD and ISSB disclosures (the latter expected to be adopted in the UK as soon as the standards are finalised) will require firms to provide some information about transition plans. The TPT's framework is intended to sit alongside the global standards to provide greater specificity for UK firms.

In 2023 and 2024, the FCA will consult on changes to its Listing Rules. It will also draw on TPT outputs to consult on strengthening transition plan disclosure expectations for listed companies and asset managers and FCA-regulated asset owners.

The Framework

The TPT recommends that a good practice transition plan should include:

  • High-level ambitions to mitigate, manage and respond to the changing climate and to leverage opportunities from the transition to a low Green House Gas (GHG) and climate-resilient economy
  • Short, medium and long term actions to achieve the strategic ambitions, including details of how these steps will be financed
  • Governance and accountability mechanisms that support delivery of the plan and robust periodic reporting
  • Measures to address material risks to, and leverage opportunities for, the natural environment and stakeholders (e.g. the workforce, supply chains, communities or customers) which arise as a result of the actions

The framework is based on three principles — ambition, action, and accountability: 

1. Ambition

A transition plan should:

  • Set out ambitious objectives and priorities that will contribute to a rapid and orderly economy-wide net zero transition
  • Cover the whole entity, considering the full range of levers available, and emphasise actions that can be expected to make a significant contribution to economy-wide transition
  • Consider Scope 1, 2 and 3 emissions and prioritise decarbonisation through direct abatement rather than the use of carbon credits
  • Include any transition-relevant actions that are material to the entity's long-term enterprise value — firms will need to examine of all material interdependencies including those relating to the natural environment, workers, suppliers and communities and consumers
  • Reflect the urgency of action — informed by national and international commitments

2. Action

The plan should translate the objectives into concrete steps to be taken in the short- and medium — term - the TPT defines short-term as within the next three years — and focuses on resilience. For example, the plan should set out timetables for phasing-out or managing down investment in GHG- or non-renewable energy-intensive assets and changing the carbon-intensity of the products and services offered. It should also:

  • Be connected to business and operations planning and financial accounts, and underpinned by clear resourcing plans
  • Be based on defined assumptions and an analysis of dependencies and uncertainties e.g. changing regulatory agendas, technological developments or evolving consumer demand
  • Include an assessment of the sensitivity of the plan to changes in the assumptions, including the impact on profits, cashflows and other KPIs.

Firms may need to be proactive in their regulatory or public policy engagement. The TPT advocates for inter-firm collaboration to overcome systemic barriers — for example firms engaging with carbon markets may wish to push for more formal regulation to improve the efficiency of instrument pricing mechanisms. Firms should disclose how their policy engagement will contribute to their objectives and the transition plan as a whole. 

3. Accountability

The plan should be supported by robust governance mechanisms, including Board and executive oversight, with relevant and appropriate incentivisation, comparable and decision-useful reporting and clear accountability structures.

  • The framework places significant emphasis on the`tone from the top'. Board-level arrangements for approving and overseeing progress against the transition plan must be disclosed, as well as details of individuals charged with governance and delivery against the plan. The process for cascading this tone to the wider business through systems, policies and training should be described, as should links between executive remuneration and transition plan, including KPIs used in assessments
  • Actions should be underpinned by quantified and timebound metrics and targets that are reported on an annual basis within general financial reporting
  • The extent of external verification or assurance of the plan should be disclosed; however, assurance is not mandatory — the TPT considers that existing assurance frameworks are sufficient for the review of information which would be included in the transition plan
  • Firms should seek and consider feedback from key stakeholders on an ongoing basis and should also disclose the extent to which estimations have been relied upon
  • Firms using carbon credits to offset their gross carbon emissions should disclose the reason for their usage and any third-party verification or voluntary certification scheme to which the credits are subject. Users of the transition plan should be able to understand the nature of the carbon credit — for example whether it represents the avoidance of GHG which otherwise would have been emitted or carbon dioxide that has actually been removed from the atmosphere. Appropriate metrics, including the number and cost of credits should be presented

Process, format and frequency of reporting

The TPT describes four key stages in preparing a transition plan: baselining of the current position, setting ambition, developing an action plan and ensuring accountability for delivery. It signposts additional relevant guidance from sources such as the TCFD, TNFD, Grantham Research Institute, Just Transition Centre, GHG Protocol and Science Based Targets Initiative (SBTi).

As well as including information in general purpose financial reporting, the TPT recommends that firms publish their transition plan in a single standalone document that sits alongside the Annual Financial Report. Although this will increase the reporting burden for firms, it will enable users to analyse, compare and aggregate plans across entities more easily and thus hold them to account more effectively.

The standalone plan should be updated whenever there are significant changes or, at the latest, every three years. In the intervening years, progress or content of the plan that is material to investors should be reported on an annual basis as part of TCFD- or ISSB-aligned disclosures in general financial reporting.

Implications and challenges for firms

As transition planning guidance evolves and the FCA clarifies reporting requirements, financial services firms should ensure they are adequately preparing for transition plan disclosures. This should include consideration of:

  • Whether reliable data is available to make good decisions and disclosures
  •  How best to integrate transition planning into wider ESG activity and ensure adequate focus and resourcing in an already busy area
  • How to embed genuine commitments and concrete strategy into their plans, whilst maintaining a holistic view of all regulatory obligations (including around GHG emissions)
  • How to maintain an appropriate balance between decarbonisation strategies (such as lending, underwriting or investment policies which support green technologies or channel funding away from carbon or other GHG-intensive activities) and protecting customers (e.g. through continuing provision of mortgages and insurance for energy inefficient properties)

The TPT's proposals centre around contributions that companies can make to a rapid and orderly transition to net zero. However, whether an orderly transition is still likely or achievable is hotly debated, and firms should ensure that they consider both orderly and disorderly transition scenarios in their wider strategy and risk management processes. They should also take note of the potential negative impacts on financial stability, as called out by the Bank of England earlier this year, from transitioning too rapidly, and ensure that they are balancing ambition and achievability appropriately.


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