Compass

Transition Plan Taskforce – Call for Evidence

Justin Elks, Partner, Risk Consulting and Daniel Spreckley, Manager, Risk Consulting
14/07/2022
Compass
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Many firms have begun work on climate change. The TPT’s call for evidence should drive action, not delay it.

Last year, the UK government set out its vision to establish a Net Zero-aligned Financial Centre. In order to support UK efforts on addressing climate change, the FCA is making it mandatory for certain financial sector firms and public listed companies to disclose their climate transition plan, under the Task Force on Climate-Related Financial Disclosures (TCFD) reporting framework. The number of firms within the scope of these requirements is set to increase, and expectations of non-listed companies are also growing.

TPT timeline 

This follows new Sustainability Disclosure Requirements (SDR) set out by the Chancellor in July 2021, and publication of the government’s roadmap and strategy to green the financial system in October last year.

In parallel, many firms have begun developing their own transition roadmaps to integrate consideration of climate change into their business strategy. Given the wide-reaching nature of climate, and ESG more broadly, this is an important step in setting the direction a firm will take, and identifying the actions they will take to deliver the required change.

What has happened in the past six months?

A little over six months on and the Transition Plan Taskforce (TPT), a specialist group set up as a cornerstone of the UK’s Net Zero strategy, is seeking firms’ input to the development of a ‘gold standard’ for transition planning. This includes a Sector Neutral Framework (SNF) for development of standardised and meaningful Net Zero transition plans, as well as supplementary sectoral templates and guidance for private sector firms.

Under TPT, firms will be expected to take a more holistic approach to transition planning and disclosure, as well as significantly improving reporting on the actions they are taking to transition their business.

We see this is an important next step in moving beyond commitments and targets to robust action. In the longer-term, new requirements on disclosure will increase accountability and enable scrutiny, while encouraging candid dialogue on industry challenges and creating transparency on climate issues and firms’ progress.

Are we seeing action?

While arguably TPT will increase standards around transition planning, there is a danger that some organisations wait until the finalisation of the framework, scheduled for early 2023, before developing their transition plans and driving the actions needed, to enable climate change to be tackled with the urgency it needs. While a ‘gold standard’ is a valuable aim, it is important not to let perfect get in the way of good enough.

There is also a danger that organisations see the value of a transition plan in disclosure and creating a positive perception rather than in taking effective action. There is therefore a risk that transition plans are used to enable greenwashing, rather than to progress towards Net Zero through effective steps and useful information.

Already, a growing number of financial institutions and listed companies have developed transition plans, and are disclosing their progress under the TCFD reporting framework. For those just getting started, anticipation of a gold standard for transition planning should not delay action. While climate regulation is becoming more stringent, there are opportunities for firms to demonstrate leadership, capture business benefits by influencing positive change, and make a difference in the world, while avoiding accusations of greenwashing. 

How Crowe can help

If you would like to discuss Net Zero transition in more detail, or if you would like some advice on how to take a practical approach to developing your own Net Zero transition plan, please get in touch with either Justin Elks, Isaac Alfon, Dan Spreckley or Simona Villa.

Contact us

Justin Elks
Justin Elks
Head of Risk Consulting
London