Net-zero transition plans - what's next?

The UK Government is set to make the UK the “world’s first Net Zero-aligned Financial Centre”. To achieve this, climate transition plan disclosures are becoming mandatory for listed companies and financial institutions by 2023. However, climate transition plans announced so far have been “varied in detail and in quality”, according to the UK’s Transition Plan Taskforce (TPT).

The TPT is working to develop a gold standard for such disclosures, and recently launched a Call for Evidence for credible climate transition plans (which closes on 13 July, in case you want to participate).

What does it take to create a credible climate transition plan?

A climate transition plan is a time-bound action plan. It should clearly outline how an organisation will achieve its strategy and aims to pivot its existing assets, operations and entire business model towards the latest and most ambitious climate science recommendations.

The UK Government’s fact sheet on the topic published in November 2021 states that a transition plan should set out:

  • high-level climate risk mitigation targets
  • GHG reduction targets
  • a commitment to net zero with regular milestones
  • actionable steps the company plans to take to achieve those targets.

But environmental disclosure alone is not enough to make net-zero transition plans credible. Such plans need to lead to accountability and transformation, and link to a business’s overall strategy.

According to CDP, incorporating the following key elements helps constitute a credible decarbonisation plan:

  • Governance
  • Scenario analysis
  • Financial planning
  • Value chain engagement and low-carbon initiatives
  • Policy engagement
  • Risks and opportunities
  • Targets
  • Scope 1, 2 and 3 accounting with verification.

Getting started with a net-zero transition plan

The TCFD framework is an excellent starting point to guide baseline thinking on climate risk and opportunity. We recommend that companies commit to a science-based target, especially to the net-zero standard, and engage with specialists to help them to understand economic and physical scenarios, and opportunities for reduction, and to engage employees and customers to deliver the changes needed to achieve those goals.

If you would like to explore how Luminous can help you on these or related issues, please get in touch: rachel.madan@luminous.com