Transition plans describe how, as the wider economy transitions towards net zero, a company positions itself within a more sustainable economy.
These plans, and companies’ disclosures of the same, have been receiving increased attention from regulators: UK Financial Conduct Authority rules for certain economic sectors already entail certain transition-plan related requirements, which the UK Government intends to further enhance. Recent regulatory and legislative proposals in the US and the EU also feature transition plan disclosures, in some cases prominently.
In this environment, guidance on how to design transition plan disclosures may be a valuable tool for companies to navigate a landscape that is full of complexity and risk. Indeed, several initiatives have developed guidance to support the effective disclosure of real-economy transition plans. A recent report by the Glasgow Financial Alliance for Net Zero (“GFANZ”) on “Expectations for Real-economy Transition Plans” seeks to help companies navigate existing guidance by demonstrating how companies can leverage such guidance.
This memorandum outlines evolving regulatory requirements relating to transition plan disclosures in the UK, EU and US, and the investor pressure to which transition plan disclosures may be subject. It also provides an overview of GFANZ’s recommendations.