- Read our guide for more information on disclosing transition plans and targets.
- Consider whether you have the detailed plans and targets to provide the disclosures required. If not, accelerate your activities to ensure that you will be ready.
- Ensure that the right people from across your organisation are involved in developing your transition plan so that it is rigorous, achievable and approved by appropriate bodies.
- Familiarise yourself with guidance on creating transition plans. For example, the UK Transition Plan Taskforce aims to create a gold standard framework for companies to consider when developing their transition strategy.
(This article was published on 22 November 2022 and updated on 31 August 2023)
Highlights
What’s the issue?
Investors are seeking to understand companies’ readiness to transition to a lower carbon economy; to do that, they need more transparent and granular disclosures. If the disclosure requirements are too high-level, then there is a risk that companies may ‘greenwash’ their reporting by providing vague information.
Providing investors with clear disclosures on transition plans and climate-related targets is a key step towards eliminating greenwashing from reporting and achieving the transparency that they need to understand companies’ true readiness for a lower carbon economy.
What are the requirements?
Companies will disclose information to help investors understand the impact of climate-related risks and opportunities on their strategy and decision making, including their transition plans.
They are not required to create a transition plan or targets. However, a company needs to disclose the plans and targets that it has set or is required to have, including how it plans to achieve any climate-related targets.
The requirements aim to increase the transparency of disclosures. For example, disclosures about transition plans will include information on:
- the key assumptions and dependencies that a company has used in developing its transition plan; and
- how the company is currently resourcing the plan, or how it plans to resource it in the future.
What’s the impact?
Companies need to undertake a robust exercise to provide more transparent disclosures on their transition plans and climate-related targets. Commitments or targets disclosed need to be supported by a clear action plan.
Investors or others may challenge a company when its stated strategy in the transition plan is based on unlikely assumptions or dependencies – e.g. when it is dependent on unproven technology or unfunded activities.
Actions for management
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