Submission to the UK Government consultation ‘Climate-related transition plan requirements’

Authors: Led by Ira Poensgen with contributions from Julien Beaulieu, Camila Chamorro, Tiffanie Chan, Chiara Fulvi, Robin Goon, Laudine Goumet, Wallis Greenslade, Akos Hajagos-Toth, Mark Manning and Antonina Scheer

This report consists of a submission made by the Centre for Economic Transition Expertise (CETEx), the TPI Global Climate Transition Centre and the Grantham Research Institute in response to the open consultation by the UK Department for Energy Security and Net Zero seeking views on implementation routes for transition plan requirements. Details on the consultation, ‘Climate-related transition plan requirements’, are available here.

Summary of recommendations for the UK Government and financial regulators

1. The Government and financial regulators should take a ‘building blocks approach’, supplementing mandatory climate-related disclosures in line with UK Sustainability Reporting Standard S2 (UK SRS S2) with a legal obligation to develop, disclose and implement transition plans in line with the Transition Plan Taskforce’s (TPT) Disclosure Framework.
2. The Government and financial regulators should specify that material information about companies’ transition plans be disclosed annually as part of mandatory climate-related disclosures in accordance with UK SRS S2.
3. The Government and financial regulators should additionally encourage companies to periodically publish a formal standalone transition plan, presented in accordance with the TPT structure and recommendations.
4. The Government and financial regulators should support and expand capacity-building efforts to promote effective and credible transition planning.
5. The Government should continue to enhance efforts to support cross-system coordination, including via the Net Zero Council and Transition Finance Council.
6. The Government should require that companies, in disclosing in line with Paragraphs 1.1 and 4.3 of the TPT Disclosure Framework, follow supplementary Government guidance on how to report on the alignment of their greenhouse gas emissions targets and transition plan to the UK’s nationally determined contribution (NDC), as well as the expected trajectory of how this target will be achieved.
7. The Government should provide supplementary guidance that specifies the benchmarks that companies should use to disclose whether and how their target and plan align with the UK’s NDC and the 1.5°C target, as well as any ambition gaps and implementation gaps.
8. In such Guidance, the Government, where relevant, should specify the activities that are clearly unaligned with the relevant sectoral benchmark to strengthen the credibility and integrity of transition plans.
9. In introducing requirements to develop, disclose and implement transition plans, the Government and relevant regulators should retain the TPT’s emphasis on the importance that firms need to integrate adaptation and resilience into their transition plans.
10. The Government should integrate considerations around the climate-nature nexus into the development of transition planning policy in the UK and avoid the creation of an additional bespoke workstream on nature.
11. The Government and financial regulators should accelerate the development of resources required to enable companies to consider the climate-nature nexus in transition planning.
12. The Government should define the term ‘nature-positive’ to support a shared understanding of how the climate-nature nexus can be meaningfully integrated into transition planning.
13. The Government should assess alternative scope options for (1) coverage of greenhouse gas emissions, (2) coverage of ‘at-risk firms’, (3) coverage of firms with potential for systemic contributions, (4) coverage of firms that are publicly traded or significant participants in debt capital markets, and (5) proportionality and cost-effectiveness.