UK government transition plan consultation

July 2025

At London Climate Action Week, the UK government launched its highly-anticipated consultation on climate-related transition plans. This followed the commitment to mandate “UK-regulated financial institutions (including banks, asset managers, pension funds and insurers) and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement”.

The government notes that over 70% of FTSE 100 companies are already doing some form of voluntary transition planning — this consultation marks the start of a more formal economy-wide regime.

The consultation itself does not propose a specific set of requirements or timelines for businesses to comply with. Instead, it seeks stakeholder views on various elements of the design of potential future requirements, including the scope of mandatory disclosure and implementation, alignment with net zero targets and legal risk. The government invites a wide range of stakeholder views to ensure appropriate consideration of the practicalities of implementing any future requirements.

The consultation is part of a wider package of sustainable finance consultations that also cover UK Sustainability Reporting Standards (UK SRS) and sustainability reporting assurance – for more on these see below. All three consultations close on 17 September 2025.

With increasing pressure to take tangible action on climate change, and concerns about business resilience in the face of climate-related risks, many companies have been developing and disclosing transition plans to evidence their sustainability credentials and demonstrate that they can thrive in a net zero world.

In 2023, the Transition Plan Taskforce (TPT) published a Disclosure Framework for businesses to use as a ‘gold standard’ to develop and disclose robust, credible transition plans. The framework was intended to provide consistent and comparable disclosures across the economy and provided more detail and guidance than the TCFD framework.

This consultation draws on the work of the TPT (now under the auspices of the International Sustainability Standards Board (ISSB)). It emphasizes that transition plans are a vital part of its “commitment to secure Britain’s position as the green finance capital of the world”, and help: 

• Support firm-level emission reduction
• Increase competitiveness and reduce the cost of debt
• Support the deployment of transition finance — including mobilizing investment to grow clean energy industries
• Increase the UK’s economic resilience to climate impacts

The government stresses that embedding transition planning at a strategic level, rather than merely treating it as a compliance exercise, can help companies not only manage the risks of climate change but also seize the opportunities of the transition to net zero.

This consultation, and the wider sustainability package, are intended to help the UK “become the sustainable finance capital of the world”. The government also notes the need to foster international competitiveness and achieve growth in the UK economy. Companies can therefore use this as an opportunity to take stock of their existing commitments, assess their transition journeys, and build their commercial cases for sustainability. 

As mentioned above, the government has published two other consultations on the UK Sustainability Reporting Standards (UK SRS) and sustainability reporting assurance.

The UK SRS are the UK-specific version of the ISSB’s first two sustainability standards, IFRS S1 and S2. The draft UK SRS align largely with ISSB’s standards, but the government proposes six UK-specific amendments. The final standards are expected in autumn 2025.

On sustainability reporting assurance, the government is consulting on proposals for a voluntary registration regime for entities that offer third-party assurance of sustainability-related disclosures. The planned Audit, Reporting and Governance Authority (ARGA) would be given responsibility for creating the registration regime, setting eligibility criteria, monitoring performance and taking enforcement action. 

Firms can respond to the transition plan consultation until 17 September. The final policy package is expected by the end of October 2025, once feedback to all three consultations and the wider recommendations of the Transition Finance Market Review have been considered.

In the meantime, the FCA plans to consult on strengthening its transition plan expectations for listed companies.

KPMG in the UK’s team of transition planning, reporting and ESG specialists can work with you to support the different stages of your transition plan journey, including:

Diagnostic — Understanding your current position to build a credible and tailored transition plan

• Assessment of organisational readiness against the UK TPT framework, including evaluation of data, modelling, strategy and reporting capabilities.
• Review of emissions data (aligned with ESRS E1 and IFRS), ESG materiality assessment, ambition setting, stakeholder alignment, and scenario analysis to evaluate the impact of policy and market shifts.

Strategize — Identifying opportunities and defining a credible, cost-effective route forward

• Identification and evaluation of decarbonisation levers across policies, products, and services, supported by cost-benefit analysis and prioritisation (e.g. Marginal Abatement Cost Curves).
• Review of green funding options, sustainability targets, stakeholder engagement plans, and execution of scenario modelling and stress testing.

Transform — Implementing the plan effectively through governance, capability building and cultural change

• Integration of the transition plan into the operating model and reporting structures, alongside review and enhancement of governance and internal controls.
• Development of leadership capabilities, cultural alignment, incentive mechanisms and design of a fit-for-purpose Target Operating Model to enable delivery.

Report — Tracking progress, demonstrate credibility, and align with market and regulatory expectations

• Definition of metrics and targets aligned with the TPT framework, and development of a plan for external reporting of ambition and long-term strategy.
• Enhancement of data systems, alignment with broader reporting frameworks and creation of a narrative to communicate progress and value.

BAU Reporting — Maintain momentum and evolve your transition plan as circumstances change.

• Establishment of KPI tracking and regular scenario analysis updates, with consistent communication of performance.
• Ongoing adaptation of the plan in response to evolving regulations, risks and opportunities.

For more information on how each of these stages see Transition Plans: Moving beyond disclosure.

And for further perspectives on how the world is shifting, and how the way companies recognize and articulate the value of sustainability programs needs to change with it, see KPMG in the UK’s Reframing Sustainability report – a practical guide to creating and protecting value and harnessing regulation.