HM Treasury’s Transition Plan Taskforce goals to affect worldwide customary setting and make the UK the world’s first internet zero-aligned monetary centre.
On 25 April 2022, HM Treasury (HMT) introduced the launch of the UK Transition Plan Taskforce (TPT) to assist drive decarbonisation by guaranteeing that monetary establishments and firms put together plans to attain internet zero, in addition to to help efforts to sort out greenwashing. This transfer is a vital step linked with the UK’s growth of the brand new Sustainability Disclosure Necessities (SDR) regime that Chancellor Rishi Sunak introduced at his Mansion Home speech in July 2021. HMT’s acknowledged goal is to develop “a gold customary for local weather transition plans” and for the UK to develop into the world’s first internet zero-aligned monetary centre.
An growing variety of corporations are making public commitments to decarbonise their operations and attain internet zero emissions, however transition plans introduced to this point are, in line with the TPT, “various intimately and high quality”,[i] thereby limiting the flexibility of stakeholders to evaluate the credibility of such transition plans. Proposed guidelines introduced by the Chancellor at COP26 would require massive corporations and sure monetary sector corporations to publish a transition plan from 2023. The TPT will, over the following two years, develop: (i) a sector-neutral framework for personal sector transition plans; (ii) a sector-specific steerage for finance and different sectors; and (iii) suggestions concerning the preparation and use of transition plans. The TPT’s expectations are for such transition plans to be science-based and to assist inform the UK’s SDR. (See Latham’s latest briefing for a top level view of the SDR regime.)
The phrases of reference for the TPT set out that credible and appropriately detailed organisational local weather transition plans are important for efficient train of market self-discipline and to allow traders to carry investee firm boards and administration to account. The phrases of reference for the TPT notes that the UK authorities expects the publication of company-level transition plans to develop into the norm throughout the UK financial system. Presently, there is no such thing as a generally agreed customary or “template” for what an excellent high quality transition plan seems to be like. Nevertheless, the Job Drive on Local weather-related Monetary Disclosures (TCFD) and different investor teams have developed steerage to ascertain finest observe ideas, and the TPT is predicted to construct on this effort (together with coordinating with worldwide efforts).
One of many TPT’s targets is to ascertain sturdy requirements to assist sort out greenwashing. This objective shall be achieved via one of many TPT’s acknowledged outputs, which includes the TPT making suggestions to boost the capability of customers to successfully use transition plans and improve the capability of preparers to provide “correct, sturdy, and accountable transition plans and keep away from greenwashing”.
UK’s Worldwide Management
A powerful message conveyed on this announcement is the compatibility of the UK’s sturdy new requirements with worldwide requirements.
The principle focus of the TPT’s work shall be on offering suggestions to the UK regulatory processes, however HMT acknowledged that it additionally intends to supply a “main instance for the event of different jurisdictions’ nationwide requirements and for the event of worldwide requirements and norms”. The announcement states that the TPT will search to keep up good working relationships with others (particularly mentioning the European Fee and the US Securities and Trade Fee) that even have an curiosity in growing transition plan necessities.
Outputs and Timeline
The phrases of reference for the TPT set out an inventory of 9 outputs and a timeline for the main focus of the TPT’s work in 2022 and 2023 (with precise supply dates for the monetary providers and real-economy sectors for outputs 1 via 7 to be decided by the TPT).
||The TPT will make suggestions for a Transition Plan Disclosure Framework to allow transition plans which might be science-based, standardised, and significant. Key parts (non-exhaustive) embrace:
|2. Templates and Steering||The TPT will produce detailed sectoral Transition Plan Templates based mostly on the framework above, along with steerage on metrics and targets. This can embrace regulatory templates and steerage for:
· Finance sub-sectors
· Key actual financial system sectors
|3. Steering: Roles and Reporting||The TPT will produce steerage on the position of governance and assurance, third-party verification, and the implications of organisitional transition plans for reporting.|
|4. Enter for Upcoming UK Technique||The TPT will ship enter and cross-over to the UK’s internet zero transition pathway overview for the monetary sector. This shall be mirrored in a brand new technique anticipated to be revealed in 2022.|
|5. Suggestions: Use and Evaluation of Transition Plans||The TPT will make suggestions on find out how to simplify the evaluation, comparability, and interpretation of transition plans by customers.|
|6. Suggestions: Greenwashing||The TPT will make suggestions to boost the capability of customers to successfully use transition plans. Suggestions may even be made to boost the capability of preparers to provide correct, sturdy, and accountable transition plans and keep away from greenwashing.|
|7. Pathway||The TPT will produce a pathway for future work on transition plans for session.|
|8. Worldwide Relationships and Dialogues||The TPT will construct relationships and set up dialogues with the organisations overseeing related worldwide requirements (ISSB, TCFD, the Worldwide Platform on Sustainable Finance, IOSCO, UNSG Excessive-Degree Skilled Group, BIS, the G20 Sustainable Finance Working Group, and GFANZ) and nationwide requirements, together with “any others” that present an curiosity in growing transition plan necessities.|
|2023||9. Sandbox||The TPT will set up a sandbox for customers and preparers to pilot and consider transition plan templates, suggestions, and metrics.|
Corporations ought to count on publication of the TPT’s suggestions on outputs 1 via 7 by the tip of the 2022 fiscal yr.
The TPT’s two-year mandate will finish on 29 February 2024.
Latham & Watkins will proceed to observe developments on this space.