The Transition Plan Taskforce disclosure framework has launched: What should you know?

What should you know about the Transition Plan Taskforce (TPT) disclosure framework? Two years ago, at COP26, the UK government announced its intentions to lead the way in becoming the world’s first net zero aligned financial centre. The government launched the TPT in April 2022, to cement a gold standard for net zero transition plans.

This work culminated in the launch of the TPT disclosure framework on the 9 October 2023. This is a clear signal that net zero ambitions are no longer enough; they must be backed up by action and clear deliverables. 

What is the Transition Plan Taskforce disclosure framework?

The framework provides a robust set of recommendations so that companies can ensure their transition plan disclosures are: “high quality, consistent and comparable”, according to the Financial Conduct Authority (FCA). These recommendations can be applied voluntarily but are also very likely to become mandatory for large UK companies, subject to further consultation. The framework recommends that companies publish a standalone transition plan at least every three years, with annual updates.

What does the TPT disclosure framework look like?

The TPT framework recommends that companies disclose their net zero ambition by detailing their specific approaches to implementation, alongside other governance and accountability arrangements as well as financial plans. The framework is underpinned by three guiding principles (ambition, action and accountability) alongside five key elements (foundations, implementation strategy, engagement strategy, metrics & targets and governance) that constitute a good transition plan.

The five elements

1. Foundations: What is the company’s plan to lower its greenhouse gas emissions and help to create a climate-efficient economy? The goals should align with both the needs of the stakeholders and the environment. Furthermore attention should be paid to the implications of these plans for key areas such as the business model, value chain and any key dependencies.
2. Implementation strategy: Once the goals have been established, what are the short, medium and long-term actions that the company will take to meet its ambitions? These actions should be described specifically, identifying what policies and measures will be established to achieve the aims. Recognition should also be given to the financial implications for the organisation.
3. Engagement strategy: How will the company engage and collaborate with its value chain, industry peers, the government, public sector, communities and civil society to push towards the goals it has set?
4. Metrics and targets: By what criteria will the success of the transition plan be judged? The company can use these measures to track progress towards its ambition. It is important for disclosures to use clear metrics and targets.
5. Governance: How will the transition plan be integrated into the overall organisational arrangements and governance structures? This will help to establish the plan within the foundation of the company.

What implementation guidance has the TPT published?

The following guidance has been published to support the TPT:

• Documents which map the TPT framework against the:
  
  • TCFD recommendations
  • IFRS S2 standard from the ISSB
  • ESRS 2 General Disclosures and ESRS E1 Climate Change
  • There is a sector summary looking at various decarbonisation levers that can be used by organisations across a variety  of sectors, including consumer goods, extractive and minerals processing, financial services and renewable resources and alternative energy. This sector summary is under consultation until 24 November, with further ‘deep-dive’ guidance being planned for specific sectors such as metals and mining, oil and gas, electric utilities and power generation.
  • An explanation of the legal considerations and directors’ duties associated with a transition plan.
    

Does the TPT framework align with other frameworks? How interoperable is the TPT framework?

The TPT disclosure framework expands upon the foundations set out in the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations and the guidance of the Glasgow Financial Alliance for Net Zero (GFANZ).

There is a strong international outlook, with the intention to align the framework with the ISSB’s published standards and the wider work of the GFANZ. Representatives from both the ISSB and GFANZ are present on the TPT committee.  

By design the disclosure framework is also convergent with the climate-related disclosure standard (IFRS S2) issued by the ISSB. IFRS S2 contains provisions related to transition planning, and the TPT has published guidance indicating how these provisions map onto its own framework.

For further information regarding how these frameworks all align, the TPT has developed technical mapping documents.

Will TPT disclosures become mandatory?

There have been previous commitments from the UK government to make the disclosure of transition plans mandatory for UK listed companies. These regulations are likely to be based around the recommendations of the disclosure framework issued by the TPT. There is an anticipated consultation from the government in Q4 of 2023 looking at the nature and extent of the requirements. Meanwhile, in August 2023 the FCA stated that it would consult on transition plan disclosures in line with the TPT disclosure framework, in tandem with its consultation on implementing the UK-endorsed ISSB Standards. These consultations are predicted to take place in 2024, with a likely implementation at the start of the 2025 financial year for first reporting in 2026.

If you wish to find out more about the TPT disclosure framework there is both a launch webinar and a one-page summary document are available.