UK finance firms have praised the ambition of new climate change regulations which will set out a potentially world-leading framework for assessing companies’ climate transition plans.
The transition plan taskforce (TPT) is considering proposals to make a standardised framework for assessing climate transition plans due to concerns plans published by companies at the moment “vary in detail and quality”.
Industry bodies told City A.M . the reforms have the potential to make the UK a world-leader in environmental regulation.
“With the TPT, the UK is leading on efforts to develop a regulatory framework to make sure companies doing business in the UK disclose their plans to decarbonize and respond to climate change,” Tony Rooke, a member of the TPT Delivery Group and an executive director at the Glasgow Financial Alliance for Net Zero (GFANZ) said.
Chair of UK Sustainable Investment and Finance Association (UKSIF) James Alexander agreed, saying the plans have “potential to help shape other countries’ approaches in the coming years.”
“As more jurisdictions, such as the EU and others, consider proposals for transition plans, there are leadership opportunities for the UK in moving forward with swiftly developing these plans,” Alexander said.
UK Finance said the TPT was an opportunity for the UK to be “truly world leading” although it identified a couple of issues for the TPT to focus on.
The industry body called on the TPT to set out a ‘must have’ disclosure framework alongside its ‘gold standard’ approach. This, UK Finance said, would encourage “gradual improvement toward best-practice”.
It also drew attention to the potential issues for multinationals, suggesting TPT needs to reflect the fact they will have to abide by multiple sets of rules. “There is a risk that the guidance could create operational and legal barriers to disclosure by global financial institutions,” UK Finance said,
TheCityUK drew attention to the international dimension too, saying the TPT needed to consider the implications for multinational firms which must respect jurisdictional climate targets.
To minimise international differences, the TPT will build on work from GFANZ and the International Sustainability Standards Board, both of which have established frameworks to help assess companies’ transition plans internationally.
TheCityUK said it endorses the aim to “maximise international alignment” when developing the TPT disclosure framework.
Looking forward, Emma Reynolds, managing director at TheCityUK, said stakeholders will need to “work together to maximise the impact of its work and ensure transition plans fit into wider net-zero issues, be globally interoperable where possible, and supported by credible net-zero policies and incentives for the wider economy.”
What is the Transition Plan Taskforce
The TPT, which was launched in April 2022, will make recommendations to inform the UK’s regulatory requirements on transition plan reporting.
Transition plans are reports released by companies specifying what actions companies are taking on climate change, most frequently explaining how the company will reach net zero.
Although transition plans are increasingly common, there are few guidelines on exactly how the plans should be reported, making it difficult to compare different plans and hold companies to account on their climate reporting.
The consultation period for the taskforce ended last week. The final disclosure framework is expected to be published in the summer or autumn of 2023.