The Transition Plan Taskforce (TPT) aims to establish a gold standard for private sector climate transition plans in UK business and industry.
The TPT, announced at COP26 by the UK Chancellor, has now published its Disclosure Framework and accompanying Implementation Guidance and has also launched a Sandbox for companies and financial institutions to test implementation.
The TPT Disclosure Framework makes recommendations for companies and financial institutions to develop gold-standard transition plans. The TPT Implementation Guidance sets out the steps to develop a transition plan, as well as when, where and how to disclose their plan. The Sandbox will test the Framework and Guidance to help users and preparers create their own transition plans.
“Transition Plans are fundamental to ensuring the financial system supports our transition to net zero,” said Andrew Griffith MP, economic secretary to the treasury and co-chair of the TPT. “The UK is already the leading global centre for sustainable finance, and the TPT framework and guidance is a significant step in delivering on our commitment made at COP26 last year to become the world’s first net zero-aligned financial centre.”
TPT transition to net zero
Credible transition plans create transparency and accountability for companies and financial institutions to meet their net zero targets, and will enable investors to make better informed capital allocation decisions.
“Transition plans are a crucial tool for firms to set out and deliver on their net zero commitments, along with targeted public policy support,” says Alison Rose, ceo NatWest. “The TPT’s ‘whole of economy’ approach to transition planning recognises the contribution all companies, including those in the service sector with relatively low emissions, can play in enabling and accelerating the transition. The Framework crucially also gives space for organisations to set out the action needed from governments to implement a successful, economy-wide transition.”
The Framework emphasises the need for concrete, short-term action by companies and financial firms across the economy. The TPT recommends that companies and financial firms consider the full range of levers at their disposal to contribute to, and prepare for, an economy-wide transition to net zero. This will help avoid potential unintended consequences of ‘paper decarbonisation’.
The Framework will inform future regulation in the UK. The TPT will use the consultation and Sandbox feedback to finalise the Disclosure Framework and Implementation Guidance. After this point the Financial Conduct Authority plans to draw on the TPT’s final outputs to strengthen their transition plan disclosure expectations of listed companies, asset managers and regulated asset owners.
“The TPT framework is a really helpful step forward,” says Rob Doepel, managing partner for sustainability at EY UK. “A lot of businesses have the right ambition they want to be more sustainable and do the right thing for the environment but sometimes don’t know how to go about it and how to tackle some of the big issues. The TPT guidance aims to fill that void. There is a lot of other regulation hitting corporates and TPT have worked hard to make sure the guidance is complementary and fits neatly with those other regulatory requirements and frameworks.
“It’s a really important opportunity for UK businesses to assess all the different ESG things they’re doing and ask themselves, ‘are we doing enough? Are we doing it to the right degree? Where are our gaps in knowledge and action and how are we going to address them over coming years?’”
Embracing existing standards
The new TPT Framework, while seeking to establish it’s own best-practice standard, will inform and build upon existing international disclosure standards in a bid to deliver clarity in what is currently a minefield of reporting and compliance issues.
“Right now there are a lot of different standards and reporting structures that are causing confusion and there is a need for consolidation,” Doepel says. “The ISSB which sits under IFRS is critical in efforts to drive standardisation of disclosure regulation and they are working hard to gain agreement from all the different regions that up to now have all approached the issues differently. Consolidation will definitely come in time and we’ll end up with less disparate regulation. Like TCFD and the new EU CSRD regulation TPT is focussed on net zero transition and has worked closely with these standards bodies to develop certainty and a clear framework for businesses to follow.
“The TPT provides a detailed plan to help businesses understand how to create and implement a gold standard transition. It includes real life examples from organisations that focus on specific areas of the framework and it also highlights areas of action and reporting that match existing global standards.”
Scope three is the area that every large organisation is struggling with and different sectors are struggling at different depths, Doepel observes. “There’s a lot of work going on with WRI around the definition of scope three and TPT provides guidance on addressing your value chain and practical engagement with supply chain and external stakeholders, how to share the challenges with them and how to integrate their challenges into your corporate strategy. TPT shows how to build new relationships with your supply chain because both parties need something new from each other.”
Design, develop and deliver a plan
The TPT guidance sets out what companies will need to do to design develop and deliver their transition plans and aims to help businesses overcome barriers to sustainability.
“Many businesses are de-prioritising net zero delivery due to current economic conditions but early adoption of decarbonisation plans can unlock value for businesses,” Deopel says. “TPT provides a catalyst for businesses to be first movers, with early adoption providing benefits commercially and in attracting the best talent. I would encourage industry not to think of TPT as a burden or just another compliance requirement but to embrace it as an opportunity. It’s a framework you can use to galvanise your business, as a leverage point to address sustainability at an enterprise level and in doing so create new value.”
Climate change poses great risks not only to individual organisations but to the stability of the financial system, warns Sarah Breeden, executive director for financial stability at the Bank of England. “Actions taken by the private sector today will determine the size of future risks which is why it is crucial that firms develop and disclose robust transition plans with a focus on concrete short-term action. The TPT’s guidance will be key in building the transition infrastructure necessary for supporting the financial sector to allocate capital efficiently.”
Now is the time for organisations to take action, says Amanda Blanc, group ceo of Aviva and co-chair of the TPT. “We have seen a wave of private companies announce their net zero ambitions but we now need them to come forward with high quality plans to show how they will meet their targets. Building on the work from GFANZ and the ISSB, the TPT Disclosure Framework will ensure that everyone has a consistent understanding of what is needed.”
The Disclosure Framework and Implementation Guidance can be accessed here
The TPT Disclosure Framework and Implementation Guidance are open for public consultation until 28th February 2023.