The International Regulatory Strategy Group (IRSG) welcomed the opportunity to respond to the Transition Finance Council’s consultation on entity-level Transition Finance Guidelines. Our response highlighted the following key points:
- Global Interoperability
- The IRSG strongly supports alignment with internationally recognised frameworks, particularly the International Sustainability Standards Board (ISSB), UK Sustainability Disclosure Requirements (SDR), and the Transition Plan Taskforce (TPT) Disclosure Framework.
- It will be important to ensure the Guidelines are compatible with the EU Sustainable Finance Disclosure Regulation (SFDR) and voluntary frameworks such as the Climate Bonds Initiative and GFANZ guidance.
- Interoperability is essential to avoid duplicative reporting and to support cross-border investment.
- Consistency and Flexibility
- No direct conflicts are identified between the Guidelines and other frameworks, but the Guidelines must remain flexible and principles-based to accommodate differences in regulatory approaches and market maturity.
- We recommend treating elements like technical screening criteria, Do No Significant Harm, and Social Safeguard (SS) provisions as reference points, allowing for justified deviations based on local circumstances.
- Proportionality for Emerging Markets
- The IRSG calls for explicit flexibility for entities in emerging markets and developing economies (EMDEs), recognising the challenges of data access and the need for proportional approaches to metrics and timelines.
- The Guidelines should encourage capacity building and technology transfer. They should also promote international collaboration and engagement with local stakeholders to ensure that transition planning reflects regional realities.
- Credible Ambition Principle
- The IRSG supports the Credible Ambition Principle and its carbon lock-in requirements, provided they are applied proportionately and allow for disclosure. We caution against rigid alignment with 1.5°C pathways, noting that such targets are non-static and may not be feasible for all sectors or jurisdictions.
- Universal Factors
- The IRSG agrees with the Universal Factors and supports proportionality, especially for SMEs and entities in emerging markets.
- We highlight challenges in evidencing factors such as implementation strategy, governance, financial viability, and Scope 3 emissions. We recommend that the Guidelines allow for flexibility and qualitative assessments where data is limited.
- Application Across Asset Classes and Geographies
- The IRSG supports the ambition for the Guidelines to be applicable across asset classes and jurisdictions but recommends clearer implementation guidance.
- Key recommendations include recognition of group-level reporting for multinationals, flexibility in emissions reporting, and clear sequencing of requirements aligned with the UK’s sustainable finance framework.