This article was first published by BloombergNEF.
Climate transition plans are entering the mainstream, as policy makers and financial institutions search for credible proofs that carbon-emitting industries and companies are moving toward net zero.
These plans set out an entity’s climate objectives, together with the strategies, engagement, governance and metrics for it to achieve them. The “gold standard” blueprint is laid out by the UK’s Transition Plan Taskforce, or TPT, which released a set of cross-sector disclosure recommendations on October 9.
An increasing number of regulators are pushing for the disclosure of transition plans. The UK’s Financial Conduct Authority will adopt the TPT framework for disclosure by listed entities, with the first reports due in 2026. Regulators in the European Union, US, Singapore and Australia have also made or are in the process of developing policies encouraging, if not mandating, entities to disclose transition plans.
Financial institutions are also incorporating these plans into their decision-making. The German unit of ING Groep NV rejected loan applications based on borrowers’ responses to the bank’s inquiries about their carbon footprint, according to Bloomberg News. NatWest Group Plc and Mizuho Financial Group Inc. have signaled similar intentions.