In this blog, Sarah Roper delves into the TPT's new Disclosure Framework (DF), offering guidance for companies to align with the three key principles and addressing frequently asked questions.
The DF’s alignment to the ‘soup’
The overarching goal of the framework is to ensure that companies are disclosing crucial information about their transition plan, such as the risks and opportunities, in a comparable and consistent format. It is based around three guiding principles of Ambition, Action and Accountability, and is aligned with and builds on the IFRS S2 ‘Climate-related Disclosures’ standard issued by the International Sustainability Standards Board (ISSB).
The TPT has also provided a technical mapping of the DF against IFRS S2 and the TCFD, as well as a comparison document against ESRS 2 ‘General Disclosures’ and ESRS E1 ‘Climate Change’.
What should reporters do?
The TPT has organised five disclosure elements around the three principles of Ambition, Action and Accountability:
With this framework, it is important for companies to keep in mind that this is not reporting for reporting’s sake. This is about improving decision making within the company that's actually making the transition plan, as well as providing transparency to investors and capital markets around what went into that decision-making process.
Frequently asked questions
Q: Do I need a separate report for my transition plan?
A: No, but it is recommended. The TPT advises companies to incorporate transition plan details into their general-purpose financial reports in addition to publishing a standalone transition plan report.
Q: What are the benefits of a standalone transition plan?
A: A standalone transition plan can enhance communication of a reporter’s strategy, help external audiences understand the complexities of the transition, and facilitate effective analysis and comparison of plans across peers. The TPT suggests using cross-referencing to general-purpose financial reports, updating the plan periodically, and optionally including extra information that might not be crucial for a primary financial report.
Q: What is the TPT’s advice for integrating transition plans into financial reports?
A: The TPT recommends that companies integrate material information about their transition plan, including annual progress updates, within broader sustainability-related disclosures. The disclosure should align with specific sections of the IFRS S2 standard. For example, information about transition planning governance should be part of overall governance disclosure, and transition strategy details should be integrated into the entity's climate strategy disclosure. Similarly, transition-related risks, opportunities, metrics and targets should be included in relevant sections of IFRS S2.
Q: How frequently should I update a standalone report?
A: The TPT recommends updating your standalone transition plan every three years, or more frequently if there are significant changes to the plan.
The next steps
This November the TPT is planning to release sector-specific guidance across 40 distinct sectors. Although the framework is new and voluntary, the UK Government has committed to moving towards making the disclosure of transition plans mandatory; so it's likely that this framework, which acts as support for companies, could ultimately lead to a regulation in the future.