Source · Select Committees · Environmental Audit Committee
Recommendation 9
9
Deferred
Paragraph: 69
Deferring mandatory transition planning risks UK's green finance leadership position.
Recommendation
We agree with the Government that the operating environment will become increasingly difficult for those firms that do not set out their plans for contributing to net zero. However, we do not think it is enough to leave the issue of transition planning to the market. The UK led the way globally with its introduction of mandatory reporting in relation to the Taskforce on Climate-related Financial Disclosures (TCFD), and now risks losing its leadership position in the green finance space by deferring its commitment to mandatory transition planning made at COP26. At the same time, we understand the risk of capital flight and the need to remain internationally competitive.
Government Response Summary
The government established the Transition Plan Taskforce (TPT) to create a gold standard for private sector climate transition plans and will hold an upcoming consultation to consider the UK’s approach, including the TPT’s Disclosure Framework.
Paragraph Reference:
69
Government Response
Deferred
HM Government
Deferred
We are supporting organisations in the finance sector as they transition their activity to align with net zero pathways. In April 2022 we launched the Transition Plan Taskforce (TPT) to create the gold standard for private sector climate transition plans. Building on what we set out in the Green Finance Strategy on transition plans, our upcoming consultation will consider the UK’s approach to transition plans. The consultation will consider the role of the TPT’s Disclosure Framework, and help to inform the UK’s assessment and endorsement of the International Sustainability Standards Board (ISSB) standards. In particular, the consultation will help to inform our assessment of the transition plan-related material within International Financial Reporting Standards (IFRS) S2. As acknowledged, transition plan disclosures already form part of the Financial Conduct Authority (FCA)’s TCFD-aligned disclosure rules for listed companies, asset managers and FCA-regulated asset owners. In addition to this, the FCA introduced guidance encouraging listed companies and asset managers/asset owners to make transition plan disclosures where headquartered or operating in a jurisdiction with a net zero commitment, or to explain why not. The FCA have now committed to consult on guidance that will set out their expectations for listed companies’ transition plan disclosures at the same time as consulting on their policy approach in relation to the ISSB standards. They plan to develop their guidance with reference to the final outputs from the TPT.