Our response to the Transition Plan Taskforce Disclosure Framework

03 March 2023

We appreciate the efforts of the Transition Plan Taskforce (TPT) in compiling this disclosure framework. We consider that, in order to enable this framework to achieve its aim in the UK and to replicate this approach in other markets, the following needs to be taken forward:

  1. Liability issues need to be resolved on how climate information using estimates and forward-looking statements is treated, if it is to be considered in the same way as regulated financial information for annual reporting in the UK, US and other markets. At this stage, further guidance from global regulators is required on the approach to climate-related forward-looking statements, liability, and disclaimers. In the near term, until these liability issues are resolved, issuers should be permitted to publish their transition plans as standalone documents outside of existing annual/financial reporting. The transition plan should be published publicly on the company’s website and be as easily accessible as the annual report. We suggest that any reporting associated with the transition plan (as set out in Guiding Principle 3 in page 9 of the TPT disclosure framework) should also be provided with the transition plan on the company’s website.
  2. Preparers of transition plans may need further clarity on the requirements to update their standalone transition plans to guard against unsubstantiated accusations of greenwashing.
  3. Whilst addressing liability issues, TheCityUK considers that the scope of transition plans needs to be widened to private companies. However, it is recognised that further support to embed the TPT disclosure framework may be needed.
  4. The approach of the ISSB Exposure Draft should be mirrored, so that an entity takes the same approach to the reporting boundary for its transition plan as it does for its wider corporate reporting.
  5. The TPT should further consider the implications of their recommendation that transition plans for local entities must have regard to jurisdictional climate targets, where they are part of a multinational group. Further guidance could help address this.
  6. TheCityUK endorses the aim to maximise international alignment when developing this TPT disclosure framework; development of which should also consider forthcoming EU disclosure requirements. We also encourage the UK government to engage and promote the TPT disclosure framework at international levels.
  7. The UK government needs to ensure that the FCA’s requirements and corporate sustainability disclosure requirements are correctly sequenced when implementing the ISSB’s standards, whilst clarifying how the TPT disclosure framework translates into that reporting ecosystem. The UK government should outline in detail its approach towards building up the UK disclosures and labelling framework as well as the wider UK sustainable finance ecosystem.
  8. The UK government should take an iterative approach when implementing the TPT disclosure framework as global standards emerge, to ensure improved consistency and interoperability.
  9. As the TPT finalises the Implementation Guidance and the FCA and UK Government consider TPT adoption within the UK’s regulatory framework, the viewpoint of emerging markets should be considered, alongside providing additional flexibility on the date to full compliance for emerging markets.
  10. There needs to be a recognition of the role and limits of a single entity’s transition plan, as that entity’s success is often dependent (to varying degrees) on the UK government and its global counterparts providing an effective regulatory environment and well-aligned financial incentives, which are communicated to the private sector well in advance to support a smooth transition. The UK government needs to address these wider policy barriers to credible transition plans through its next Green Finance Strategy and by responding to the recommendations from Chris Skidmore MP’s ‘Mission Zero: Independent Review of Net Zero - final report’.
  11. We would encourage further integration of the role of nature in the TPT disclosure framework, which also needs to be supported by policies in the wider economy.
  12. It is important that, when translating this TPT disclosure framework into regulatory requirements, transition plans as forward-looking documents do not (inadvertently) create an expectation that companies must rigidly implement their individual strategies regardless of the wider economic and policy factors and barriers, technological developments and changes in scientific interpretation.
  13. TheCityUK considers it premature at this juncture to require transition plans to include disclosures in relation to planned engagement and collaborative activities with peers. Without further clarity on competition law in the UK, EU, US and in other jurisdictions, this would expose entities to increased competition and anti-trust law risk, particularly in view of the anti-ESG movement in the US. This exposure to disproportionate liability risks may outweigh the potential gain in information about an entity’s declared impact on peer engagement through trade organisations.
  14. Even if these competition and anti-trust risks were addressed as the TPT disclosure framework evolves, TheCityUK considers that the current wording within 3.2 of the TPT disclosure framework and its recommendations to be unduly onerous. It is difficult to prove cause-and effect of a single entity’s influence on broad policy positions decided collectively (outside of a competition-law compliant sustainability agreement) and with government. So rather than requiring disclosure on “how an entity ensures that commitments and actions of an entity’s trade organisation…”, the rules could instead request information on how that entity’s engagement aligns with its own strategy.
  15. Additionally, some companies may view their net zero efforts as a competitive advantage, so it should be made clear that transition plans should not oblige disclosure of commercially sensitive strategies, dependence on future performance or intellectual property.
  16. To accelerate the impact of business and civil society policy engagement, the UK government should analyse aggregated transition plan data generated from the TPT disclosure framework, to identify and address continuing policy, regulatory and incentives gaps for each sector and the wider economy.

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