UK Taskforce on Track to Shape Transition Consensus
Experts urge industry support for policymakers and regulators in ensuring international interoperability of transition finance frameworks.
Final guidance from the UK’s Transition Plan Taskforce (TPT), expected to be released shortly, should be used to avoid fragmentation and confusion internationally, industry experts have stressed.
“The international picture shows that there’s a significant momentum behind transition plans,” said Baroness Vere of Norbiton, Treasury Lords Minister at HM Treasury. “We’ve got to maintain that momentum while making sure that it is in the right direction and we get lots of interoperability.”
“We are seeing increased demand for guidance, and this is why interoperability is so important,” she added, speaking at a City & Financial Global event.
The TPT was established by HM Treasury in April 2022 to develop a ‘gold standard’ for private sector climate transition plans. The taskforce’s full final guidance was due in Q1 2024, but Kate Levick, Associate Director of Finance and Resilience at E3G and Co-head of the TPT Secretariat, told ESG Investor she expected it to be released “sometime this spring”.
Last October, the TPT issued its final disclosure framework, intended to provide a basis for companies to set out “credible and robust” transition plans as part of annual reporting.
The TPT Framework was designed to be consistent with, and build on, the International Sustainability Standards Board’s (ISSB) IFRS S2 standard, which sets out specific climate-related disclosures.
It is also aligned to guidance on transition plans developed by Glasgow Financial Alliance for Net Zero, as part of efforts to make the TPT internationally compatible.
Levick said the UK had been “aware this was a rapidly moving and emerging global norm, and wanted to encourage convergence” when it committed to regulation of transition finance.
She said the TPT had supported convergence across jurisdictions and had been mentioned as best practice in the US Treasury’s net zero principles and by the Australian Treasury when consulting on its disclosure requirements.
Global consensus on definitions and guidance around transition finance is seen as important in directing investment toward assets and companies that are aligned with achieving net zero emissions by 2040.
Patrick Arber, Group Head of Government Engagement – Sustainability, Aviva, said the finance sector could help achieve international convergence by demonstrating their backing for public sector advocacy for transition finance internationally.
“We need to support our regulators and our policymakers and encourage them to do more of that,” he added.
“I fear if we don’t, then we’re heading towards a system whether there is less convergence or more fragmentation globally,” said Arber. “Now is the moment where the UK needs to take the leadership role it has already established and make it international.”
In November, the TPT presented seven sector-specific guidance documents for consultation, with the consultation closing on 29 December. The sectors covered in the guidance include asset owners, asset managers, banks, electric utilities and power generators, food and beverage, metals and mining, and oil and gas.
Levick stressed these sectors were “very deliberately” selected, being a mixture of financial sectors and non-financial sectors which illustrate the economy’s diversity while not covering the whole of it.
Expanding transition efforts
Last month, the TPT’s mandate was extended by HM Treasury until at least 31 July 2024, with a possible further extension of three months to October 2024, in order to support the Transition Finance Market Review.
Last December, the government commissioned the Transition review to explore how to support both UK and foreign companies to access the capital required to decarbonise and deliver on net zero ambitions. Its results are due to be reported to the government this July.
The UK’s Financial Conduct Authority (FCA) is currently consulting on rules and guidance for listed companies to disclose in line with the UK-endorsed ISSB standards and the TPT Framework as a “complementary package”.
Baroness Vere said the government intends to ensure regulation for listed and unlisted firms is “heading in roughly the same direction” to avoid a “massive gap” in requirements between the two.
The FCA noted it has worked to fit the TPT’s recommendations with other relevant international initiatives.
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