UK Transition Plan Taskforce Publishes Status Update and Response to Disclosure Framework Consultation

The UK Transition Plan Taskforce (TPT) expects to release the final version of its proposed climate transition plan disclosure framework in October 2023. This is according to TPT's status update published on 27 July 2023 (Status Update). The Status Update also covers:

• TPT's response to its November 2022 consultation in respect of its draft disclosure framework and implementation guidance;
• Recent UK and global developments in transition plan disclosure obligations; and
• A timeline of key TPT publications.

It is clear from the Status Update that while corporates and other stakeholders are generally supportive of the approach taken by TPT in establishing a comprehensive framework for transition plan disclosures, there is still uncertainty as to how TPT's recommendations will be implemented in practice.

More broadly, corporates are likely to welcome TPT's commitments to ensuring alignment with the Task Force on Climate-related Financial Disclosures' (TCFD) recommendations and the International Sustainability Standard Board's (ISSB) first two sets of sustainability standards, though some may have also hoped for firm commitments regarding alignment with the European Sustainability Reporting Standards (ESRS).

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Key takeaway from TPT's Status Update

Conceptual building blocks to be retained

The Status Update confirms that TPT's final disclosure framework and implementation guidance will retain the following key conceptual building blocks:

• Strategic and rounded approach: TPT will continue to recommend that companies take a strategic and rounded approach to transition planning, including:
  • taking action to decarbonise;
  • responding to climate-related risks and opportunities; and
  • contributing to the economy-wide transition.
• Ambition, action and accountability: the key principles of "ambition, action and accountability" will continue to underpin the final disclosure framework, meaning that transition plans will be expected to cover:
  • high-level ambitions to mitigate climate change risks and leverage opportunities;
  • short-, medium- and long-term actions to achieve these strategic ambitions; and
  • governance and accountability mechanisms supporting delivery of those actions.
• Form of disclosure: TPT will continue to recommend that companies integrate material information relating to their transition plans in their general-purpose financial reporting, including information about their forward-looking strategy and progress made during the relevant reporting period.

Alignment with ISSB and ESRS

The Status Update also confirms that the final disclosure framework will ensure close alignment with the ISSB standards, including alignment on language regarding key concepts and definitions (e.g., definition of climate transition plan). Notably, TPT commits to updating its technical annex in order to map TPT's recommendations against key climate-related disclosure frameworks, including the TCFD recommendations, the ISSB's climate-specific disclosure standards (IFRS) S2 and, depending on the finalisation timeline, the ESRS.

Further clarity and guidance expected

The Status Update notes that, while consultation respondents generally regarded TPT's draft recommendations as decision-useful, several shared concerns regarding implementation, benchmarks (and consideration of wider sustainability issues) and practical application. In response, TPT makes the following commitments:

• Implementation: TPT says the final disclosure framework will reiterate that disclosure of transition plans is an iterative process. Companies are not expected to set out a definitive answer to all challenges in their first transition plan. Going forward, TPT will seek to leverage relevant provisions of IFRS S2 dealing with the expected approach to implementation, and will adjust its own recommendations under certain sub-elements of the final disclosure framework to require companies to explain the expected contribution of their planned actions rather than setting out only the quantification of expected impacts.

• Benchmarks and consideration of wider sustainability issues: the final disclosure framework will include a recommendation for companies to disclose the external requirements, transition pathways and scenarios that have influenced the approach taken in their transition plan, which may include:
  • national commitments by the countries in which they operate;
  • internationally agreed commitments; and
  • voluntary commitments made by individual businesses.

The Status Update also notes that TPT has launched three new working groups on nature, adaptation and just transition, which will advise on the integration of these topics into the final disclosure framework.

• Further guidance: TPT will update its final implementation guidance to include:
  • further explanation of individual sub-elements of the disclosure framework; and
  • updated guidance on the process to be followed in developing a transition plan, supplemented by relevant guidance and case studies developed by third parties, including sector-specific guidance for the following sectors: asset management, asset owner, banking, electric utilities and power generators, food and agriculture, metals and mining, and oil and gas.

Timeline of key publications