Transition Planning Toolkit: Briefing

Updated: November 2024

The Chapter Zero Transition Planning Toolkit is designed to support NEDs and their boards in overseeing the development and delivery of a credible transition plan, by anchoring climate strategy within the discussion of business strategy. The Toolkit is aligned with the Transition Plan Taskforce Disclosure Framework and Implementation Guidance

Transition Planning

Transition plans are becoming the new norm in the private sector climate journey.

We will need a fundamental transformation of business and finance if we are to successfully transition to a low greenhouse-gas emissions, climate-resilient economy. Every company will need to think carefully about what the transition means for them. They will have to think strategically about how they can protect and enhance long-term value by responding and contributing to a whole-of-economy transition.

High-quality transition plans enable management teams to develop, communicate and operationalise their climate strategies. A transition plan can focus attention, highlight key issues to be escalated to the board and instigate fundamental change in the business strategy.

Under existing law and regulation, UK-listed companies and most other UK-registered companies and LLPs with more than 500 employees are expected to make climate-related disclosures in line with the recommendations of the global Taskforce on Climate-related Financial Disclosures (TCFD).

In the case of listed companies, the UK Financial Conduct Authority (FCA) expects disclosure of transition plans and directly references relevant TCFD guidance. The FCA has signalled its intention to strengthen these regulatory expectations.

In particular, the FCA intends to consult in Q1 2025 on amending its rules to require reporting against disclosure standards issued by the International Sustainability Standards Board (ISSB), once these have been endorsed for use in the UK. At the same time, the FCA also intends to consult on strengthening its expectations for listed companies’ transition plan disclosures, with reference to the Transition Plan Taskforce (TPT) Disclosure Framework.

Referencing the TPT Disclosure Framework in this way will be consistent with the direction of travel in the international reporting landscape. The IFRS Foundation announced in June 2024 that it will assume responsibility for the disclosure-specific materials developed by the TPT and will use these to develop educational materials.

In the meantime, the FCA has encouraged listed companies to familiarise themselves with the ISSB Standards and start to report voluntarily against them. The FCA has previously also encouraged listed companies to engage early with the TPT Disclosure Framework and consider reporting on a voluntary basis; the UK Government will also be consulting on how the UK’s largest companies can most effectively disclose their transition plans in alignment with the UK’s Green Finance Strategy.

The Transition Plan Taskforce

The TPT, a UK government initiative with extensive industry representation was launched in April 2022 to develop the ‘gold standard’ for private sector climate transition plans. In October 2023, the TPT issued the final TPT Disclosure Framework (the ‘what’) and online Implementation Guidance (the ‘how’).

The framework was developed through a collaborative effort drawing from the wide range of expertise across the market, with over 100 organisations across finance, business, civil society, government, and academia having supported the development of the framework and over 600 organisations engaged in testing its robustness.

The TPT has ensured international consistency, having regard to the recommendations of the TCFD and the ISSB and aligning with, and drawing on, the Glasgow Financial Alliance for Net Zero (GFANZ) framework for credible, comprehensive and comparable net zero transition planning.

The TPT builds from the definition of a climate-related transition plan set out in the ISSB’s climate disclosure standard (IFRS S2 Appendix A), recommending that a good practice transition plan will set out an entity’s Strategic Ambition for responding and contributing to the transition towards a low GHG-emissions, climate-resilient economy.

The TPT Disclosure Framework. Source: TPT Disclosure Framework (see original diagram)

The GFANZ and TPT frameworks provide additional depth and detail to help preparers report effectively on transition-related disclosure requirements in the ISSB standards. Source: TPT Disclosure Framework (see original diagram)

Note: The TPT resources are now available via the IFRS’ Knowledge Hub. They include:

• the Disclosure Framework
• interpretative guidance on the Disclosure Framework and case studies
• guidance for companies on how to start or continue their transition planning journey (the ‘transition planning cycle’)
• technical mappings between the Disclosure Framework and the ISSB Standards and TCFD Recommendations, and a comparison between the Disclosure Framework and the European ESRS Standards
• sector summary with high-level guidance for 30 sectors across the economy
• sector-specific guidance for Asset Owners, Asset Managers, Banks, Electric Utilities & Power Generators, Food & Beverage, Metals & Mining and Oil & Gas
• a document examining legal considerations for companies preparing plans using the Disclosure Framework
• advisory papers on adaptation, nature, just transition and SMEs
• a paper on the opportunities and challenges of transition plans in emerging markets and developing economies

In June 2024, the IFRS assumed responsibility for the disclosure-specific materials developed by the TPT. This timeline reflects changes up to that date. For a more comprehensive overview, refer to the navigating the climate disclosure landscape explainer and accompanying climate disclosure tool.

As a NED, what is your role in Transition Planning?

Transition planning will impact the core direction of travel for your company, and as a NED you need to be involved. Many of your existing responsibilities as a NED are relevant in the context of climate-related risk and opportunity, and transition planning. These include shaping the strategy and development of the business, financial planning, oversight and disclosure.

As a NED, you are particularly well positioned to mobilise the development of a transition plan given your ability to bring an independent voice and perspective to your board, and your access to a peer network which is also engaged in the process.