PRI response to the UK government’s consultation on transition plan requirements

The UK government has set out a strong use case for the role of transition planning, and the PRI welcomes a move towards mandatory transition plan requirements. Having an ambitious and usable sustainable finance framework that enables entities to articulate their transition plan strategies should form the basis of the UK’s transition plan requirements. 

The PRI’s key recommendations are:

• Phase-in requirements to adopt, disclose and implement through best endeavours climate-related transition plans that align with net zero by 2050, including whether and how they have set interim targets (5-10 years) aligned with the Paris Agreement. Mandatory transition plan requirements would enable investors to compare steps entities are taking to transition, allowing them to capture transition-related opportunities and manage transition risks.
• Phase-in the application of transition plan requirements with a TCFD-style rollout, starting with UK-registered financial institutions and FTSE100 companies. A phased-in roll-out would help address initial reporting challenges, whilst allowing companies across sizes and sectors to be gradually brought into scope.
• Government should clarify that transition plans can be cross-referenced under UK SRS S2 and IFRS S2, in line with a building blocks approach.
• Transition plans are contingent on a clear and enabling policy environment. Aligned signals, policies, Carbon Budget Delivery Plan, and sectoral pathways are needed to build a wider transition planning ecosystem
• The Transition Plan Taskforce (TPT) frameworks and guidance integrated under the IFRS Foundation have a role in capacity building to support entities to develop credible and robust transition plans. The sub-elements of the TPT’s framework could also be taken forward in government’s requirements to support high-quality, flexible and comparable transition plan disclosures.

 Read our full response below.