TPT Implementation Guidance

1

CONSULTATIONThe Transition
Plan Taskforce
Implementation
Guidance
NOVEMBER 2022

TPT Implementation Guidance2

TPT IMPLEMENTATION GUIDANCE
The drafting of this Framework was led by Implementation Guidance Workstream of the Transition
Plan Taskforce, with input from the TPT’s Delivery Group and Steering Group and support fromthe TPT Secretariat. The TPT would like to thank the co-chairs of the Workstream, Nicolette Bartlett(Chief Impact Officer, CDP) and Mark Manning (Technical Specialist, Financial Conduct Authority),
as well as all members of the Steering Group, Delivery Group and Workstream, which included
representatives from:

Aldersgate Group

Investment Association

Aviva Plc

Just Climate

Bank of England (Observer)

Legal & General Investment Management

UK Department for Business Energy and

Linklaters

Industrial Strategy (Observer)

Canada Pension Plan Investment Board
CCLA
Chapter Zero
Church of England Pensions Board
Climate Change Committee

London School of Economics
London Stock Exchange GroupNatWestNational Employment Savings Trust
Organisation for Economic Cooperation
and Development (Observer)

Climate Safe Lending BoardØrsted UK

Confederation of British Industry

Phoenix Group

CDP

RailPenFinancial Conduct Authority

RobecoFinancial Reporting Council

ShareAction

Glasgow Financial Alliance for Net Zero

SSE

Green Finance Institute

The Pensions Regulator

HM Treasury

UK Sustainable Investment and Finance

The Institutional Investors Group on

Association (UKSIF)

Climate Change

Unilever

Institute of Chartered Accountants ofWorld Business Council on Sustainable

International Sustainability Standards

WTW

England and Wales
Board (Observer)

Impact Investing Institute

Development

WWF UKThe TPT would like to thank all those that have contributed to the development of this Framework. This

document does not necessarily represent the views of individual taskforce members or their organisations.

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CONTENTS
Preface											4Introduction										5Chapter 1: Key stages to preparing a transition plan				

8Stage 1 - Baselining current position						

9Stage 2 - Setting ambition								12Stage 3 - Developing an action plan						

14Stage 4 - Ensuring accountability for delivery					

16Chapter 2: Disclosing a transition plan						

202.1 How transition plans fit into existing and emerging disclosures

21

2.2 Location of transition plan reporting						

222.3 Audit, assurance and verification considerations			

24

2.4 Alignment with wider corporate reporting norms			25

2.5 Disclosure guidance: How to interpret the TPT Framework		

27

Chapter 3: The use cases for transition plans					

54The materials produced by the TPT reflect a synthesis of best practice at the time of publication. They do not constitutefinancial, legal, or other professional advice and should not be relied upon as such. Neither the TPT Disclosure Framework nor
any guidance prepared by the TPT is statutory or regulatory guidance, though they may form an input for the developmentof such guidance at a later date. TPT materials are not intended to alter or otherwise affect rights or obligations understatute or regulation. These outputs may nevertheless be informative for entities which are preparing transition plans inaccordance with the Financial Conduct Authority’s (FCA) initial expectations on disclosure of transition plans by asset

managers and FCA-regulated asset owners (ESG 2 in the FCA Handbook), and listed companies (LR 9.8.6 (8) in the FCA
Handbook) in accordance with the guidance from the Task Force on Climate-related Financial Disclosures (TCFD).

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Preface: About the TPT
BACKGROUND & RATIONALE
The UK has set itself ambitious and legally binding

to inform both the UK’s regulatory requirements

net zero by 2050, with binding interim targets. The

guidance.

targets to cut greenhouse gas (GHG) emissions to
UK has also pledged at UN climate negotiations
to cut emissions by at least 68% by 2030, in

the context that nearly every country has alsoannounced targets to reach net zero emissions

around the middle of the century under the Paris
Agreement1.

In October 2021, the UK government publishedon transition plan disclosures and supporting

The TPT is simultaneously consulting on the TPT
Disclosure Framework, and Implementation
Guidance. This draft of the Implementation

Guidance will be open to consultation until 28

February 2023. Consultation responses should besubmitted via the TPT Website.

the Greening Finance Roadmap, signallingthat it intends to strengthen new and existingsustainability reporting requirements forcompanies, including publication of climatetransition plans2. At COP26, the UK Chancellor
further committed to work towards the UK

becoming the world’s first net zero aligned

financial centre and ensuring that financial flows
shift towards supporting a net zero economy3.

The Chancellor also set out that the UK will movetowards making publication of transition plans

Early plans have varied inquality and often lack detailon the short-term actions
that are being taken toachieve these targets.

mandatory.

These developments create a new operating

context for the private sector. A growing number ofentities have already announced net zero targets

and other climate pledges. As of June 2022, around702 companies from the Forbes 2000 list haveannounced a net zero target4.

But early plans have varied in quality and often
lack detail on the short-term actions that are

being taken to achieve these targets. This makes
it difficult to assess the credibility of individual

plans, or to compare approaches to transition

planning across multiple entities. The Transition

Plan Taskforce (TPT) will make recommendations

1) See UK Climate Change Act 2008 and the UK’s Nationally Determined Contribution, as updated September 2022
2) See Greening Finance: A Roadmap to Sustainable Investing, October 2021
3) See Fact Sheet: Net Zero-aligned Financial Centre
4) See Net Zero Stocktake 2022, June 2022

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Introduction
The Transition Plan Taskforce (TPT) has launched the first draft of the
TPT Disclosure Framework (the Disclosure Framework or Framework)for consultation. This Implementation Guidance accompanies the
Framework and aims to support two key audiences:• For preparers – it can be used to assist in the preparation of credible, useful, and consistenttransition plans in line with the TPT Disclosure Framework.

• For users – it outlines why transition plans are useful, encourages the creation of standardisedand comparable disclosures and provides a standard against which plans can be assessed.

This Implementation Guidance supports entities to prepare transition plans. It covers:

Chapter 1 	A summary of key planning stages and process steps entities may consider
following when preparing a credible transition plan.

Chapter 2 	An overview of where, when and how to disclose transition plans against the

TPT Disclosure Framework, including how the Framework aligns with existing andemerging standard and wider corporate reporting norms. The Implementation

Guidance provides interpretative guidance for each of the Sub-Elements in the
Framework on how to meet the disclosure recommendations.

Chapter3 	An overview of how external stakeholders might use transition plans to
inform their strategic decision-making.

Both the Framework and this Implementation Guidance are designed to apply across sectors.
The TPT will develop sector-specific guidance in 2023.

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INFOBOX 1:

KEY CONCEPTS FROM THE TPT DISCLOSURE FRAMEWORKThis Implementation Guidance builds on key concepts developed in the Framework. These include atransition plan definition and three guiding principles (Ambition, Action and Accountability) to assist
entities in applying the Framework disclosure recommendations.

The TPT defines a transition plan as follows:
A transition plan is integral to an entity’s overall strategy, setting out its plan to contribute to and prepare
for a rapid global transition towards a low GHG-emissions economy. 5;6

The TPT recommends that a good practice transition plan should cover:a.	an entity’s high-level ambitions to mitigate,
manage and respond to the changing
climate and to leverage opportunities of thetransition to a low GHG and climate resilient
economy. This includes GHG reduction
targets (e.g., a net zero commitment);b.	short-, medium- and long-term actions theentity plans to take to achieve its strategic
ambition, alongside details on how those
steps will be financed;c.	governance and accountability
mechanisms that support delivery of theplan and robust periodic reporting; andd.	measures to address material risks to,and leverage opportunities for, the naturalenvironment and stakeholders such as
the workforce, supply chains, communities
or customers which arise as part of theseactions.

5)In a manner that is consistent with its constitutional documents and the duties of its directors and senior managers.
6) Transition plans should reflect the urgency to act. An entity’s transition plan should therefore be informed by both national commitments and thelatest international agreement on climate change. This should also include relevant commitments made by jurisdictions in which the entity operates (i.e.
Nationally Determined Contributions submitted under the Paris Agreement). For entities headquartered in the UK, this means that a transition plan should
explain how the entity has taken into account the UK’s legal commitment to reducing GHG by at least 100% of 1990 levels (net zero) by 2050 and the interim
targets defined in the Sixth Carbon Budget.

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The Disclosure Framework is grounded in three guiding principles:1.	“Ambition” – Contribute to andprepare for a rapid and orderly
economy-wide net zero transition.

be taken in the short- and medium-term. A

	A transition plan should outline ambitious

the financial accounts, and underpinned by

objectives and priorities for contributing to andpreparing for a rapid and orderly economy-wide
net zero transition. The plan should cover thewhole entity, consider the full range of levers thatthe entity has available, and emphasise actions
that can be expected to make significant

contributions to an economy-wide transition.

This implies that any emissions reduction target

should consider Scope 1, 2, and 3 emissions andshould prioritise decarbonisation through directabatement over purchasing carbon credits.

A plan should include any transition-relevant

actions which are material to the entity’s longterm enterprise value. An entity should therefore
examine all material interdependencies,
including those that relate to the naturalenvironment, workers, suppliers, communities,
and consumers. Transition plans shouldreflect the urgency to act. An entity’s transition
plan should therefore be informed by bothnational commitments and latest international
agreement on climate change.

2.	“Action” – Focus on concrete actions
which emphasise theshort-term and strive for resilience.
	A transition plan should translate ambitious
strategic objectives into concrete steps totransition plan is integral to an entity’s overall

strategy. As such, it should be connected to theentity’s business and operations planning andclearly articulated resourcing plans. An entity

should develop its plan on the basis of definedassumptions and an analysis of dependencies
and uncertainties. It should assess thesensitivity of the plan to changes in theseassumptions and seek to mitigate delivery risks
where possible.

3.	“Accountability” – Enable delivery of
the plan through clear governancemechanisms along with consistent,
comparable and decision-usefulreporting and verification.
	Delivery of a transition plan should be

supported by robust governance mechanisms,
including Board and executive oversight, with
relevant and appropriate incentivisation,

reporting and accountability structures. The
actionable steps set out in the transition

plan should be underpinned by quantified

and timebound metrics and targets that arereported against on an annual basis, within

general purpose financial reporting. Entities
should be transparent about the degree towhich transition plans are subject to externalverification or assurance and should seek andtake account of feedback from key stakeholders
on an ongoing basis.

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CHAPTER 1 – KEY STAGES TO PREPARING A TRANSITION PLAN
Preparing transition plans enables management teams and Boards of
Directors to create and adapt an entity’s strategy to meet its climate
targets. The TPT has split out the strategic thinking into four key stages.
At each stage, this Implementation Guidance

Across all stages, management should identify key

against the TPT Disclosure Framework. Eachstakeholders on the development of the plan.

outlines process steps for an entity to disclose
process step aligns with the Elements of the
TPT Framework. These process steps are notexhaustive, and individual steps may need to be

iterated as strategic thinking on the plan evolves.

Baselining
current
position01• Assessment of climaterelated risks andopportunities• D ecarbonisation levers
assessment•A nalysing
interdependencies• Emissions footprinting

Setting
ambition02

milestones to engage with employees and external
Once the process steps under each of the four key

stages have been completed, an entity will be wellplaced to communicate its transition plan using
the TPT’s Disclosure Framework.

03

04

Developing
an action plan

Ensuring
accountability
for delivery•S etting objectives andpriorities•D esigning a strategic
roadmap• M onitoring andreporting on outcomes•S etting GHG reduction
targets•D esigning a changemanagement programme•D eveloping adecarbonisation
prioritisation•R esponding to thechanging climate• Assessing approach tointernal and external
assurance•C onsidering materialinterdependencies•F inancial planning andsensitivity analysis• Engagement programme• Review and improving
monitoring processes• D efine roles andresponsibilities• Building awareness andcapacity to deliver thetransition

Figure 1: The four key stages to preparing a transition plan

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INFOBOX 1:

Building on existing methodologies and guidance
The TPT seeks to build on existing transition plan methodologies, guidance and frameworks. This
document draws on the outputs of specific initiatives throughout the process steps, including:• assessing climate-related risks and opportunities – TCFD7, CDP;		• emissions and target setting – GHG Protocol8, SBTi9;		• abatement and decarbonisation activities – GFANZ10, VCMI11, ICVCM12;		• metrics and Targets – GFANZ, CFRF13 ; and		• governance and change management programmes – GFANZ.

The stages proposed are designed to apply universally across sectors. The TPT recognises thatterminology and key process steps will vary by sector. Entities should use their judgement whenassessing how to tailor the process steps for their entity and sector, and refer to relevant sectorspecific third-party guidance.

When following the key stages, entities should refer to key corporate reporting norms (see Section2.3) and the Disclosure Framework (see Section 2.4) to understand the level of detail expected intransition plan disclosures.

STAGE 1: BASELINING CURRENT POSITION
The first stage of preparing a transition plan is understanding an entity’s current position using the foundations
laid by the TCFD: performing a stocktake on the entity’s exposure to climate-related risks and opportunities, its
current emissions profile and the levers at its disposal to transition.

The following steps will inform an entity of its current preparedness to contribute to and prepare for a global
transition to a low-carbon economy that is resilient to the changing climate. These steps should inform theentity’s disclosures against the 1. Foundations, 2. Implementation Strategy and 4. Metrics and Targets Elements.

Assessment of climate-relatedrisks and opportunities

risks and opportunities (physical and transition)

An entity will likely be performing scenario analysis

assessment will help an entity define key priorities

to assess its climate-related risks and opportunities
as part of its TCFD reporting process. The outputof this assessment can form a starting point foran entity to understand its ability to decarbonise
its operations and supply chain, and to shore up

strategic resilience as it responds to the risks of thechanging climate.

Where it has not already done so in its existing TCFD

reporting process, an entity should translate climate
7) Task-Force on Climate-related Financial Disclosures8) Greenhouse Gas Protocol
9) Science Based Targets initiative10) Glasgow Financial Alliance for Net-Zero11) Voluntary Carbon Markets Integrity Initiative12) Integrity Council for the Voluntary Carbon Market13) Climate Financial Risk Forum

into principal business risks and opportunities(e.g., operational, financial and reputational). Thisfor its transition plan and understand the feasibilityof its overarching climate ambition.
Relevant guidance:• TCFD Implementation Guidance (Table A1.1 andA1.2) – further information on potential climaterelated risks and opportunities.

• TCFD Knowledge Hub – guidance on scenario
analysis.

This may inform disclosures against Sub-Elements
1.1 Objectives and priorities and 1.2 Business model
implications.

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Decarbonisation levers assessment
An entity may undertake a strategic levers

assessment in which it seeks to understand what

This may inform disclosures against Sub-Elements 1.1
Objectives and priorities, 1.2 Business model implications
and 2.1 Business planning and operations

actions, resources and projects it has available toenable entity-level decarbonisation and influence
economy-wide decarbonisation. This assessment
will inform which actions are most feasible andimpactful to take in the short, medium and long-

Analysing interdependencies

speed at which it can feasibly decarbonise andIn designing its transition plan, an entity may

this assessment, an entity may consider:climate action and the natural environment andterm. It will further help an entity understand theinform long-term interim target setting. As part of
For real economy entities: Conducting an economic
abatement capacity assessment, in which it

analyses the proportion of its emissions that areeconomic to abate using current technologies,

consider material interdependencies between

stakeholders such as the workforce, supply-chains,communities or customers. As part of this, theentity may consider:• conducting a nature impact materiality

or projected to be economic to abate in the nearassessment consistent with the Prototype ofswitch to a renewable power purchasing agreement

Disclosures’ (TNFD) LEAP Methodology;

future. For example, it may already be economic toor invest in operational efficiencies that reduce
emissions. This assessment should cover the

potential for reducing Scope 3 emissions, e.g., via
engagement with entities along the value chain.
Relevant guidance:• Abatement Capacity Assessment Guidancedeveloped by CPP Investments.

For financial institutions: assessing the entity’s
potential for supporting economy-wide

decarbonisation via four financing strategies outlined
by GFANZ:• Climate solutions: financing or enabling thedevelopment and scaling of climate solutions toreplace high-emitting technologies or services;• Aligned: financing or enabling entities alreadyaligned to a 1.5ºC pathway;• Aligning: financing or enabling the transition ofreal-economy firms, according to robust netzero transition plans; and• Managed phaseout: financing or enabling

the accelerated managed phaseout of highemitting assets.

Relevant Guidance: Further information on thefour GFANZ approaches can be found in their

Recommendations and Guidance for Financial
Institutions Net-Zero Transition Plans andExpectations for Real-economy Transition Plans

the Task Force on Nature-related Financial• assessing the risks to and opportunities for,the entity’s workforce, suppliers, impacted

communities, and customers that may arise
from its interim and long-term targets; and• defining social impacts as relevant tobusiness model and operations.

Relevant guidance: There are several external

resources that entities may find helpful in analysing
interdependencies. These include:• Taskforce on Nature-related Financial
Disclosures Framework beta v0.2;• Climate Action 100+ Net Zero Company

Benchmark (Indicator 9 – Just Transition);• G rantham Research Institute (2022) Making
Transition Plans Just;• J ust Transition Centre and the B Team (2018)
Just Transition: A Business Guide.

This may inform disclosures against Sub-Elements 1.1
Objectives and priorities, 1.2 Business model implications
and 2.1 Business planning and operations.

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The TPT recognises that
entities may currently facechallenges in reporting
accurate and reliable
Scope 3 emissions data
Emissions footprinting
Scopes 1 and 2: An entity will likely already bereporting under the UK’s Streamlined Energy andCarbon Reporting (SECR) requirements, which

requires certain UK entities to disclose Scope 1 and2 emissions, and an emissions intensity ratio, acrossmultiple reporting periods. If not, the entity should

calculate a baseline of Scope 1 and 2 emissions inline with the GHG Protocol Corporate Accounting
and Reporting Standard.

Scope 3: An entity should apply the steps andreporting boundaries of the GHG Protocol’s

Corporate Value Chain (Scope 3) Accounting andReporting Standard to measure and report on
Scope 3 emissions.

The TPT recognises that entities may currently facechallenges in reporting accurate and reliable Scope
3 emissions data. Where an entity is unable tocalculate its Scope 3 emissions for some or all of thecategories outlined in the GHG Protocol’s guidance,
it should still identify the relevant upstream anddownstream Scope 3 emission categories frelevant
to it. To identify relevant Scope 3 categories, anentity may refer to the GHG Protocol’s criteria for

identifying relevant Scope 3 activities (see Infobox2), as well as the CDP Technical Note: Relevance of
Scope 3 Categories by Sector.

Once the relevant Scope 3 categories have been
identified, an entity should review what steps areneeded to overcome barriers to setting targets andreporting against those categories and include
these steps in its strategic roadmap (Stage 3:
Developing an action plan).

This may inform disclosures against Sub-Element 1.1
Objectives and priorities and 4.3 GHG emissions metrics
and targets.

INFOBOX 2:

GHG Protocol’s criteria for
identifying relevant Scope 3
activities
The GHG Protocol provides the following
criteria to help an entity identify which
Scope 3 activities are relevant: ize: they contribute significantly• S

to the company’s total anticipated
Scope 3 emissions;• I nfluence: there are potential

emissions reductions that could

be undertaken or influenced by thecompany;• R isk: they contribute to the company’srisk exposure (e.g., climate change
related risks such as financial,

regulatory, supply chain, product andcustomer, litigation, and reputationalrisks);

 takeholders: they are deemed• S
critical by key stakeholders (e.g.,customers, suppliers, investors, or civilsociety);• O utsourcing: they are outsourced
activities previously performed

in-house or activities outsourced

by the reporting company that are
typically performed in-house byother companies in the reporting
company’s sector;

 ector Guidance: they have been
• S
identified as significant by sectorspecific guidance; and ther: they meet any additional• O

criteria for determining relevancedeveloped by the company orindustry sector.

Source: GHG Protocol Corporate Value

Chain (Scope 3) Accounting and ReportingStandard, pg. 61

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STAGE 2: SETTING AMBITIONManagement may consider the steps below to examine their level of ambition to contribute to andprepare for global transition to a low-carbon economy that is resilient to the changing climate.

These steps are not necessarily sequential and may need to be iterated as an entity’s strategic
thinking is refined. These steps should enable an
and Metrics and Targets Elements.

entity to disclose in line with the Foundations

Setting objectives and priorities

Setting GHG reduction targets

An entity should translate its strategic ambition

When setting GHG reduction targets, an entity

supplemented by timebound targets andcategories of emissions and measurement basis

into clear objectives and priorities, which are
milestones. Setting activity-level objectives

and milestones to manage transition risks andaccelerate transition opportunities can help toensure that a transition plan has a clear structureand demonstrate a focus on key action areas.

Examples of objectives and priorities could include:
increasing the energy derived from renewablesources, reducing GHG emissions across Scopes 1, 2
and 3, or phasing out high-emitting activities. Such
objectives should be supplemented by long-term
and interim targets and milestones that allow anentity to monitor delivery. For example, an entity

could set a target of sourcing all electricity supply

from new renewable power generation capacity by
2025. The entity may also consider targets related

to strategic interdependencies, such as targets forreskilling employees from high-emitting businessshould consider the relevant scopes and(see emissions baselining in Stage 1). An entity

may consider setting specific targets for different
scopes of emissions. The TPT recommends that

all long-term GHG reduction targets should havean interim target, with interim targets defined as

the next 5-10 years. In line with the TPT’s definitionof a transition plan, GHG reduction targets should
be informed by both the latest international

agreement on climate change and relevant

commitments made by jurisdictions in which theentity operates. In setting net zero targets, an entity
may refer to the guidance provided by the Science
Based Targets initiative (SBTi) and may choose tohave its targets independently verified by
the SBTi.

Relevant guidance:

units to transition opportunities.

•

SBTi Corporate Net-Zero Standard;

Objective setting can be revisited once the delivery•

SBTi Corporate Manual v2.0;•

SBTi How-to Guide.

plan is more evolved, but the TPT recommends

seeking feedback on the proposed objectives fromkey stakeholders early in the process to agree thedirection of the transition plan.

This may inform disclosures against all Sub-Elements
under 1. Foundations and 4. Metrics and Targets

Note: It is understood that some entities may not set
targets against all scopes and categories of emissions
immediately. An entity may prioritise the most relevant
emission scopes and categories. In such cases, theentity should be transparent about which scopes andcategories have been included. Where targets forrelevant scopes and categories have been excluded
from its objectives and priorities, an entity should also
state the reason for omitting them, and the steps it istaking to enable target-setting for relevant scopes andcategories (See Emissions footprinting).

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Developing adecarbonisation prioritisation

its financed emissions, creating new low-carbon

An entity may determine its decarbonisation andreduction through direct abatement overrisk mitigation prioritisation based on the materialityof its emissions profile across Scopes 1, 2 and 3.

This prioritisation will likely also be informed by its

strategic levers assessment, as well as its defined
objectives, and GHG reduction targets. An entity’sprioritisation will vary significantly depending on

factors such as its sector, size and geography andwill also consider business model implications.
This exercise should lead an entity to focus its

most material emissions, which may cover any

combination of issues, including decarbonisingproducts, or cutting emissions from its built

environment. An entity should prioritise emissions
purchasing carbon credits.
Relevant guidance:• GHG Protocol: A Corporate Accounting andReporting Standard• Entities may further find existing sectoral
guidance helpful for setting their own
priorities

This may inform disclosures against all Sub-Elements
under 1. Foundations and 4. Metrics and Targets.

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STAGE 3: DEVELOPING AN ACTION PLAN
In developing a transition plan, an entity can be expected to translate their long-term targets into

concrete short-, medium- and long-term actions. The steps outlined below are intended to enabledisclosures against the Implementation Strategy and Engagement Strategy Elements of the Disclosure

Framework. This includes consideration of activities, capital investment, emissions reductions, andinteractions with material interdependences.

Designing a strategic roadmap
Once an entity has defined its interim and long-term targets and milestones, it should develop aroadmap of actions across the short-, mediumand long-term to reach those goals (informedby the decarbonisation prioritisation step). The

roadmap of short-term actions should be granular

at an activity level and should involve engagement

to operationalise the plan. An entity should thenseek to address any gaps identified as part of thisprocess.

This may inform disclosures against Sub-Elements
2.1 Business planning and operations, 2.2 Products
and services, 2.3 Policies and conditions, 5.2 Roles,
responsibility and accountability and 5.3 Culture.

across corporate functions in collectively assessing
how to deploy and implement the plan. Activities

Responding to the changing climate

could include: engaging with suppliers to reduce

In designing a transition plan, an entity should takefor high-emitting activities; piloting new low-

climate. An entity should therefore consider

additional research on key assumptions underlying

plan to understand whether the changing climate

mechanisms to assess the roadmap.

objectives and priorities, including in the medium

to consider as part of preparing this roadmap

their GHG emissions, devising phase-out plans

into account the likely impacts of the changing

carbon technologies or products; performing

conducting a sensitivity analysis on their transition

the transition plan; and identifying monitoring

may impact the feasibility of meeting theirThis may inform disclosures against all SubElements under 2. Implementation Strategy and 3.
Engagement Strategy.

to long-term. For instance, a power provider may
need to assess how the increased likelihoods ofdroughts may impact its reliance on availabilityof water to supply hydroelectric power or provide
cooling of nuclear sites.

Designing a change-management
programme

This may inform disclosures against all Sub-Elements
under 2. Implementation Strategy.

To enable effective implementation of a plan,an entity should consider building a change
management programme. The change

management programme should engage

all functions of an entity. This will enable anunderstanding of relevant resourcing needs todeliver the transition plan and of how all functions
feed into the process. A change management

program can also facilitate whole-of-organisationagreement on responsibilities for delivery, reveal
material skills gaps, and encourage detailed

assessment of the capacity of current resources.
The program should address associated backoffice investment, data requirements, policies

and processes, and reporting systems required

Considering materialinterdependencies
An entity should consider designing steps tomanage and mitigate any significant risks to its

strategic plan, including interdependencies arisingfrom impacts on the natural environment andstakeholders such as the workforce, supply-chains,communities or customers which arise as part ofthese planned actions.

This may inform disclosures against all Sub-Elements
under 2. Implementation Strategy.

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Financial planning and sensitivity
analysis

relationships with third parties, such as with

An entity should assess how the strategic plan will

programmes to encourage outcomes withincustomers, suppliers or portfolio companies,
it may seek to devise tailored engagement

impact its expected financial position, financial

its Scope 3 emissions and drive real economy

performance and cashflows over time. This

decarbonisation. These programs may seek toincludes expected changes to capital expenditure,promote collaborative approaches between

asset write downs, operational expenditures,

entities over several years. An entity should tailordemand for products and services and wider

approaches for different parties based on theirfinancial impacts. In addition to financial planning,

emissions profile, size and bargaining power,

an entity should undertake sensitivity analysis tobetter understand the dependency of its transition
plan on specific assumptions underpinning theand prioritise engagement accordingly.

	Engagement with industry peers – where anplan being realised (e.g., scaling new technology,

entity finds that there are systemic barriers to

demand). This will allow an entity to better assesscollaborative approach may need to be taken.

inform further iterations of its implementation andindustry alliances, trade organisations or directly

supply chain action, policy change, shifts inachieving its transition objectives, a cross-sector

and monitor the feasibility of its plan and shouldThis could include creating or participating inengagement strategy. For example, this analysis

engaging with industry peers.

can help an entity understand the key policychanges it requires to achieve its climate ambition,

	Engagement with government, public sector

and civil society – similarly, an entity may review

communicate these in its disclosures and develop

its engagement activities with government,

an appropriate policy engagement strategy. The

public sector and civil society to ensure that

finance function of an entity should fully participate

these are aligned with and support its transitionin these steps in order to ensure an organisational

objectives. As part of its transition plan, it may

understanding of how the underlying assumptions

seek to encourage governments or regulatorsin the transition plan are connected to general

to create new policies and regulations that

purpose financial reporting.

facilitate net-zero aligned investment andtransition of its sector.

Relevant guidance:•

GFANZ Financial Institution Net-zero Transition
Plans.

•	
GFANZ Expectations for Real-economy
Transition Plans.

This may inform disclosures against Sub-Elements 2.4
Financial Planning and 2.5 Sensitivity Analysis.

Engagement programme
An entity will need to collaborate with a range ofexternal stakeholders to drive systemic change.
An entity may want to strategically prioritise its

engagement efforts, based on where it can expect
to achieve the highest possible impact. Whendeveloping an engagement programme, an entity
should consider:E ngagement with value chain and portfolio
companies – where an entity has close

Relevant guidance:•Global Standard on Responsible Corporate
Climate Lobbying.

This may inform disclosures against Sub-Elements 3.1
Engagement with value chain, 3.2 Engagement withindustry, and 3.3 Engagement with government, public
sector and civil society

TPT Implementation Guidance

16

Stage 4: Ensuring accountability for delivery
Transition plans should be underpinned by clear accountability mechanisms to enable delivery. Oncean entity has developed its strategic response, entity management should focus on the mechanisms inplace to manage the plan and monitor its delivery. This stage focuses on the Metrics and Targets andGovernance Elements of the Framework.

Monitoring and reporting on outcomes• Amount and extent of assets or businessactivities vulnerable to transition and physicalAn entity should define a suite of metrics, targets

risks (e.g., percentage of revenue from coaland key performance indicators (KPIs) that canmining, number and value of mortgage loans

be used to assess whether it is making progressin 100-year flood zones etc.).

towards the strategic objectives and priorities

identified under Stage 2 – Setting ambition, and• Amount of capital expenditure, financing or– Developing an action plan. What metrics andrisks and opportunities (e.g., percentage ofreporting on outcomes will depend on a range

products and services, investment in climate

against the action plan devised under Stage 3

investment deployed toward climate-related

targets are most appropriate for monitoring andannual revenue invested in R&D of low-carbon

of factors, including an entity’s business model,

adaptation).

size, strategic objectives etc. The TPT recommends• Proportion of executive managementthat an entity considers defining targets forremuneration that is linked to climate

different types of metrics, including businessand operational metrics, financial metrics, GHG

considerations.

emissions metrics and carbon credits.

Relevant guidance:

Firstly, an entity may seek to incorporate and build•

Climate Related Risk Forum Guide 2021: Climate

Metrics, Targets and Transition Plans, particularly•

GFANZ Financial Institution Net-zero Transition•

GFANZ Expectations for Real-economy Transition

upon the TCFD’s Guidance on Climate-related

its guidance on cross-industry climate-related

disclosure recommendations (pp. 10-28 ; 54-65).
The objectives identified earlier in the process

should be converted into formally-defined metrics

Data and Metrics;
Plans.
Plans.

with robust methodologies (Stage 2 – Objective
setting).

More specifically, an entity may want to assess

This may inform disclosures against all Sub-Elements of
4. Metrics and Targets

which of the metrics and targets that it may

already report on under TCFD-aligned disclosures
could be meaningful for measuring progressagainst its transition plan. Examples include:• Scope 1, Scope 2, and Scope 3 greenhousegas (GHG) interim emissions reduction
targets.

The entity should assign responsibility for delivery of thetransition plan to functions across the entity.

TPT Implementation Guidance

17

Assessing approach to internal andexternal assurance
An entity should consider the control environmentof its transition plan disclosure inputs. In doing this,an entity may consider engaging their internal

audit function, documenting and recording metricmethodologies, performing quality control on data
inputs (including those from external sources), andassessing adequacy of procedures for internal
controls.

In the UK, there are currently no external assurance
requirements, or plans to mandate external

assurance, on sustainability information. However,increasingly entities are choosing to obtain external
assurance on sustainability information, including
GHG emissions, in response to stakeholder
demands. More information on audit andassurance can be found in Chapter 2.3 - Audit,
assurance and verification considerations.

This may inform disclosures against all Sub-Elementsof 4. Metrics and Targets

Reviewing and improving monitoring processes
Transition plan disclosures and underlying plans

and non-standardised analytical methodologies

delivers on and iterates its transition plan. As part

expected in emissions inventories, and the GHG

will deepen and mature over time, as an entityof the process, an entity may consider the following
steps in relation to metrics and targets:

Revising targets against delivery – as an entity

implements its transition plans, progress against

for deriving metrics. Data uncertainties are

Protocol explains how to document these in

the chapter ‘Managing Inventory Quality’ of the
Corporate Accounting Standard of the GHG
Protocol.

targets might be ahead of or behind the planned

Once the gaps are identified, a programme of work

which could prompt the entity to review its plan

engaging with third parties such as suppliers andtrajectory, because of external or internal factors,
and targets. An entity should consider defining

internally how regularly to review its targets andkey triggers for inflexion points. This could include
accelerating planned activities, increasing

ambition or escalating engagement activities.
Identifying and mitigating data gaps – following
the assessment of possible metrics to monitor
outcomes and delivery, an entity may further

analyse what the main current data challenges arewhich hinder reliable reporting. Data challenges
an entity may need to overcome could include
inconsistent definitions, limited availability ofrequired inputs, variable quality of required inputs,should be developed to close these gaps, including
value chain members, and to disclose relevant
information under the Engagement Strategy
Element.

Relevant guidance:•

GHG Protocol’s Corporate Accounting andReporting Standard (Chapter ‘Managing
Inventory Quality’).

This may inform disclosures against all Sub-Elements of
4. Metrics and Targets

TPT Implementation Guidance

18

Define roles and responsibilities
An entity should define roles and responsibilities
relating to the transition plan across the entity:

Building awareness and capacity todeliver the transition
The transition plan will only be successful if an

Executive oversight – to ensure there is sufficient

entity’s employees, senior executives and Board

accountability structures for its delivery, an entity

in delivering the plan, and ensuring it is integrated

suite to senior management, including:

To ensure this is the case, an entity may consider:level of oversight of the transition plan and clear

of Directors are trained and educated on their roleshould assign responsibility across the executive

into the culture of the entity and value proposition.

• ultimate sign-off of the strategy and transition

Board training – ensure the board members have• agreeing the strategy, plans, risk

to challenge whether the plan prepared by• setting performance objectives;

Relevant guidance:• change management implementation and

•

plan;

management and budgets;

performance;• capital investment, acquisitions anddivestitures;• engagement with employees and external
stakeholders;• monitoring, overseeing and reporting on
progress;• internal assurance; and• investment in R&D.
Operational delivery and reporting – inaccordance with the change management plan,an entity should assign responsibility for deliveryof the transition plan to functions across the entity.
This could involve engaging with cross-functional

teams discussing climate, beyond the sustainability
teams, to ensure it covers the full scope of businessactivities including reporting and disclosure.
Relevant guidance:•G FANZ Financial Institution Net-zero Transition
Plans (Table 12).

This may inform disclosures against all Sub-Elements of
5. Governancethe right competencies, knowledge and expertise
executives is robust and credible.

Chapter Zero Board Toolkit 2022

Employee training – upskill and educate

employees within an entity on the transition plan

to ensure that they are equipped with the skills andknowledge to deliver it. This involves:• Identifying future knowledge and skills needs,
and to building a skills taxonomy to identify

gaps between current and required skills andknowledge.

• Taking action to fill any identified skills andknowledge gap. Broader knowledge andawareness could be built through internal
development programmes, including

company-wide training on climate scienceand what that means for the company (e.g.,
how the company needs to change andopportunities presented by doing so).

• Investing in more targeted training to upskill,
reskill and educate employees where newskills and knowledge requirements havebeen identified for key staff roles involved in
executing the transition plan.

• Aligning new skills and knowledge needs withrecruitment efforts.

• Developing programmes to encourage

staff behaviours which drive climate goals,

The entity should assign
responsibility across theexecutive suite to senior
management

and consider how these are linked toremuneration.

Culture impact – consider how an entity’s culture
and employer brand supports the successful

delivery of the transition plan; this can include thefollowing actions:TPT Implementation Guidance19• Bringing together key employees to map

out how the transition plan could enable anentity’s business and workforce strategy, andto define the people initiatives required todeliver on this.

• Promoting awareness of climate issues

among leaders and managers, using training
to equip and empower them to become
climate role models.

• Building climate into an entity’s employer

brand and values, to send a message thatclimate is a priority and pave the way forbehaviour and culture change• Using and establishing regular and consistentlistening and communications exercises

to build engagement and knowledge. Thisshould connect the workforce to the climate

strategy and enhance understanding of how
individual roles can contribute to successful
delivery of the transition plan.

Remuneration and incentives – align an entity’s
remuneration programme with the transition

plan objectives, in order to align the interests ofexecutives and other relevant staff with successful
delivery of the plan. Performance metrics should

be strategically aligned, material to the individual
participant, measurable, clear and transparent.

Targets should be appropriately stretching for the
relevant individual.

Relevant guidance:•	
W TW’s Executive Compensation Guidance for
the Climate Transition (pp. 15–17).

Accountability mechanisms – seek feedback

from key external stakeholders on the transition
plan throughout the transition plan reporting

cycle, in order to ensure that the ambition, actions
and accountability mechanisms align with

their expectations. Key stakeholders to consider

discussing the development of the plan with areshareholders14 , clients or consumers, suppliers,

assurance providers15 , employees or communities(for more examples, see Chapter 3 –How Transition
Plans are used).

This may inform disclosures against all Sub-Elements of
5. GovernanceOnce the process steps under each of the four key
stages are complete an entity will be well placed
to communicate its transition plan using the TPT’s
Disclosure Framework.

14) For example, this could be via putting the transition plan to an advisory, non-binding shareholder vote at the Annual General Meeting. For example, see:
Say on Climate
15)As part of the reporting process it may be worthwhile to seek feedback from assurance providers to test the incorporation of the assumptions of the plan
into general purpose financial reporting

TPT Implementation Guidance

20

CHAPTER 2 – DISCLOSING A TRANSITION PLAN
The TPT Disclosure Framework is based on three guiding principles:
Ambition, Action and Accountability. These are framed to ensure that anentity can effectively communicate the strategic and rounded approach ofits transition plan. The TPT’s Framework is structured around five Elements,
which mirror the key components of a transition plan recommended by
GFANZ. Building on this structure, the TPT recommends disclosures in relation
to 19 Sub-Elements which are summarised in Figure 2.
This section covers the considerations for an

Framework and align with general purpose

using the TPT’s Framework. By following thisa transition plan and material updates, andentity when disclosing their transition plan,

Implementation Guidance, an entity will beable understand to disclose against the TPT’s

financial reporting, when and where to disclose
how the TPT Framework fits in with existing andemerging guidance.

Three Layers of the Framework updated 22.09.2022
PRINCIPLES

Ambition

ActionPLANNING
PROCESSDISCLOSURE
ELEMENTSDISCLOSURE
SUB-ELEMENTS

Accountability

Key stages of transition planning

1. Foundation

2. Implementation
Strategy

3. Engagement Strategy

4. Metrics & Targets

5. Governance

1.1 Objectives and priorities

2.1 Business planning andoperations

3.1 Engagement with value
chain

4.1 Governance, businessand operational metrics andtargets

5.1 Board oversight andreporting

1.2 Business model
implications

2.2 Products and services

3.2 Engagement withindustry

4.2 Financial metrics andtargets

5.2 Roles, responsibility andaccountability

2.3 Policies and conditions

3.3 Engagement withgovernment, public sector
and civil society

4.3 GHG emissions metrics
and targets

5.3 Culture

4.4 Carbon credits

5.4 Incentives andrenumeration

2.4. Financial planning

2.5 Sensitivity analysis

5.5 Skills, competencies andtraining

Figure 2: The TPT Disclosure Framework

TPT Implementation Guidance

21

2.1 How transition plans fit into existing and emerging disclosures
Under current UK reporting rules, many large

companies, asset owners and asset managers
are already required by UK regulators and thegovernment to make TCFD-aligned disclosures. In

addition, the FCA has set out initial expectations on
disclosure of transition plans by asset managers,

FCA-regulated asset owners and listed companies
in accordance with the TCFD’s guidance ontransition plans.

The TCFD has created an international framework
for entities to disclose how they consider andrespond to climate-related risks and opportunities.
The ISSB is currently building from the TCFD’s

recommendations to build a global baseline

accordance with ISSB standards as adopted andendorsed for use in the UK.16

The TPT’s recommendations directly build on theexisting and emerging guidance on climate-relatedrisks disclosures, as provided by the TCFD and the
ISSB, both of which include recommendations

to disclose some information about an entity’stransition plan. Entities should therefore not see

the TPT disclosure recommendations as separablefrom or parallel to TCFD or ISSB disclosures. Instead,the Disclosure Framework and Implementation

Guidance should be considered as a jurisdictional

initiative to provide an additional layer of specificity
for transition plan disclosures.

corporate reporting standard for all significant

To support preparers through the process ofGoing forward, the UK government expects that

into their TCFD recommended disclosures, thesustainability-related risks and opportunities.

ISSB standards will form a core component of the

Sustainability Disclosure Requirements (SDR), andthe backbone of its corporate reporting element. As
a result, it is anticipated that existing TCFD-aligned
disclosure rules in the UK will be replaced by arequirement for certain companies to disclose inintegrating content from their transition plan

TPT Technical Annex provides a mapping of the
Framework Sub-Elements against a) the TCFD
transition plan disclosure recommendations(including the implementation annex), and b)

specific provisions of the ISSB’s Exposure Draft ofLatest versionDisclosures.
- as of 11.10.22 after ISSB comments
IFRS S2 Climate-related

Working withTPT Disclosure
Framework
Provides a gold standardtransition disclosure
framework.
The FCA is involved and will draw
on this work to strengthentransition plan disclosure rules
for listed companies andfinancial institutions.

TCFDThe TPT builds on GFANZ, a voluntary Financial Sector
Initiative which has developed recommendations andguidance to support financial institution and real
economy Net-Zero Transition Plans.
High-Level Expert Group on the Net-Zero Emissions
Commitments of Non-State Entities, established with theaim to develop stronger and clearer standards for net-zeroemissions pledges by non-State entities – including businesses,
investors, cities and regions – and speed up their implementation.

I SSB

Current basis of climate-related
disclosure requirementsin the UK.

Expected future basis of climaterelated disclosure requirements in
the UK, building on the TCFD.

TCFD includes arecommendation to prepare
Transition Plans in the updated
Implementation Annex.

The ISSB’s proposed IFRS S2
Exposure Draft contains
disclosure requirements for anentity to provide information about
its transition plans.

Figure 3: Relationship to other standards.

16) It is also anticipated that this will be complemented by a requirement for entities and their investors to report eligibility and alignment with a UK
taxonomy – an objective and science-based set of descriptors of sustainable economic activities. This will bring UK preparers in line with similar
requirements in the EU and other jurisdictions developing regulated taxonomy reporting globally.

TPT Implementation Guidance

22

2.2 Location of transition plan reporting
Disclosure against the TPT’s Framework should

integrate with, and build from, broader climate-

related disclosures in a reporting entity’s general
purpose financial reports (such as a UK listedcompany’s annual report).

We also recommend that, as well as including

We recommend that
entities update thestandalone transition plan
periodicallyinformation in general purpose financial reporting,entities publish their transition plan in a single
standalone document that sits alongside theAnnual Financial Report. We recognise that thiscarries an additional reporting burden for entities.
However, presenting the transition plan in astandalone document, according to the structure
outlined in the TPT’s Framework, will enable users

to analyse, compare and aggregate plans acrossentities, and hold entities to account more easily(see Chapter 3). Furthermore, we recommendthat entities update the standalone transition

plan periodically, either when there are significant

Year 0Financial Reporting
TCFD or ISSBTransition
planning process

First Transition
Plan Publication

changes to the plan or, at the latest, every three
years.

In the interim years (Years 1 and 2 in Figure 4

below), progress against the plan and all othercontent in the plan that is deemed to be material toinvestors should be reported on an annual basis aspart of annual TCFD- or ISSB-aligned disclosures ingeneral purpose financial reporting (i.e. the Annual
Financial Report).

Year 1

Material
Information

Year 2

Year 3

Second Transition
Plan Publication

Material
Information

Elements of the

TPT Sector-Neutral Framework
Foundation
Implementation strategy
Engagement strategy
Metrics & Targets
GovernancePublication of material information in
general purpose financial reporting

Publication of standalonetransition plan

Figure 4: The Transition Plan reporting cycle

TPT Implementation Guidance

23

The TPT would expect material information related

If an entity prepares a long-form TCFD ordisclosures made in relation to governance, strategy,

purpose financial reporting, the transition plan

to the transition plan to feature within TCFD-aligned
risk management and metrics and targets. For
example:• Information related to the governance oftransition planning should form part of overall
governance disclosure;• Key details on an entity’s transition strategy

sustainability report outside of the generalmust be clearly separable (e.g., as an appendix
or separate document).

In the future, it is anticipated that entities will

apply the same reporting norms as those set out
in ISSB standards, once finalised and available
for use in the UK.

should form an integral component of its
overall climate strategy disclosure;• Material financial risks relating to the transition
plan, and wider financial risks arising fromtransition and adaptation should be reported

within an overall risk management disclosure;and• Transition-related targets and performance
metrics should form part of overall climaterelated metrics and targets.

The TPT would expect
material transition planrelated information tofeature within TCFD-aligned
disclosures.

TCFD pillars

TPT Framework
Elements and Sub-Elements

Governance

GovernanceFoundations••

Objectives and priorities
Business model implications

Implementation Strategy
Strategy

•
•
•
•
•

Business planning and operations
Products and services
Policies and conditions
Financial planning
Sensitivity analysis

Engagement Strategy•••

Value chain
Industry
Government, public sector and civilsociety organisations

Risk management
Management

Metrics & targets
Targets

Metrics
Metrics&&targets
Targets

Figure 5: Mapping of the TCFD pillars to the TPT Disclosure Framework Elements and Sub-Elements (adapted from GFANZ 2022)17
17) Expectations for Real-economy Transition Plans, September 2022, p. 56

TPT Implementation Guidance

24

2.3 Audit, assurance and verification considerations
The recommendations to include material

increasingly entities are choosing to obtain external

information in general purpose financial reporting

GHG emissions, in response to stakeholder

information related to the transition plan related

does not change the scope of the statutory auditof the annual financial report. The scope does not
go beyond the auditor’s responsibility to identify
whether there are any material inconsistencies
between other information and the financial

statements, and knowledge obtained during theaudit (as per International Standards of Auditing(ISA) 720 The auditor’s responsibilities relating toother information).

External assurance standards and ethics codes
are being developed by the International

Auditing and Assurance Standards Board(IAASB) and International Ethics Standards

Boards for Accountants (IESBA) to reflect theevolving sustainability reporting landscape.
The International Organisation of Securities
Commissions (IOSCO) has welcomed thiswork, observing that high-quality, profession-agnostic standards will “support the consistency,
comparability and reliability of sustainabilityrelated information provided to the market,

assurance on sustainability information, including
demands. The most commonly used assurance
standard for these engagements is ISAE 3000

(Revised) for Independent Assurance Reporting
Engagements Other than Audits or Reviews ofHistorical Financial Information. Another standard
that is relevant, in the context of GHG emissions,is ISAE 3410, for Independent Assurance Reporting
engagements on Greenhouse Gas Statements.

Similarly, the process of formal verification is an

emerging practice. If an entity obtains assurance
or verification over sustainability information,transition plan disclosure or wider sustainability

reporting, the TPT would expect to see the following
information disclosed about the assurance orverification engagement:• t he level of assurance or verification obtained;• the scope of the engagement;• t he professional standard(s) against which
the engagement was performed;

enhancing trust in the quality of that information”.

• who the assurance provider is; andIn the UK, there are currently no external assurance• t he outcome of the engagement, for example,

requirements, or plans to mandate external

assurance, on sustainability information. However,whether the assurance provider’s conclusion
is unqualified or modified.

TPT Implementation Guidance

25

2.4 Alignment with wider corporate reporting norms
To maximise alignment, an entity should apply the same corporate reporting norms to its transition plan
disclosures as it would to its wider general purpose corporate reporting disclosures. Table 1 below illustrates
guidance and provisions from the TCFD and ISSB S1 Exposure Draft on five key corporate reporting norms, andproposed recommendations for entities to adopt in their transition plan disclosures. This list is non-exhaustive.

Reporting boundaries

Table 1: Five key corporate reporting norms from TCFD and ISSB S1 and implications for transition plan disclosures

TCFD			ISSB S1 Exposure Draft			Implication for transition plans

No explicit guidance“An entity’s sustainability-related financial

To mirror the approach in theentity as the related general purpose

should take the same approach

disclosures shall be for the same reporting
financial statements. For example, if thereporting entity is a group, the consolidated

financial statements will be for a parent andits subsidiaries; consequently, that entity’s

ISSB Exposure draft, an entity

to the reporting boundary for its
transition plan as it does for its
wider corporate reporting.

sustainability-related financial disclosures

shall enable users of general purpose financial
reporting to assess the enterprise value of theparent and its subsidiaries”

Links between climate-related
disclosures and financial statements(ISSB IFRS S1 Par. 37).
“In order to make more

“An entity shall provide information that

To ensure alignment, aninvestors, lenders, andbetween various sustainability-related

implementation of its transition

informed financial decisions,insurance underwriters

need to understand how
climate-related issues

affect and are likely to affectan organisation’s futurefinancial performance andposition as reflected in its
income statement, cash

flow statement, and balance
sheet.”(TCFD Guidance on

Implementing the TCFD

Recommendations, p.9;

see also TCFD Guidanceon Metrics, Targets andTransition Plans, pp. 45-49).

enables users to assess the connections
risks and opportunities, and to assess

how information about these risks andopportunities is linked to information in thegeneral purpose financial statements”(ISSB IFRS S1 Par. 42).

entity should explain how theplan is expected to impact its

financial planning , and reflect
this in its financial statements.
An entity should further seek

to ensure that the information
disclosed in the financial

statement is disclosed on a similarreporting basis as the transition
plan. For example, where an

entity disaggregates its financial
statements into operating

segments, it should seek tocarry that structure across to its

transition plan to enable users toconnect information between thetransition plan disclosures andfinancial reporting.

TPT Implementation GuidanceMateriality for an entity’stransition plan disclosure

26

TCFD			ISSB S1 Exposure Draft			Implication for Transition Plans“Organisations should“The assessment of materiality shall be madeTo maximise alignment, an entity

climate-related issues

users of general purpose financial reporting to

the same way in its transition

determine materiality forconsistent with how they

determine the materiality ofother information includedin their annual financial
filings.”

Incorporation of interdependent issues such associal impacts, nature and adaptationassess enterprise value” (ISSB IFRS S1 Par. 2).

“Sustainability-related financial information isshould approach materiality inplan, as it does within its general
purpose financial reporting19.

material if omitting, misstating or obscuringthat information could reasonably be expected
to influence decisions that the primary users(TCFD Guidance onof general purpose financial reporting make

Recommendations, p. 8)

information about a specific reporting entity.”

No explicit guidance“An entity’s sustainability-related risks andTo mirror the approach taken

partners’] dependencies on resources

an entity should incorporate

Implementing the TCFD

Treatment of uncertainty,
estimates and assumptionsin the context of the information necessary foron the basis of that reporting, which provides(ISSB IFRS S1 Par. 56)18.

opportunities arise from its [and its businessand its impacts on resources, and fromthe relationships it maintains that may bepositively or negatively affected by those

impacts and dependencies[…] When suchimpacts, dependencies and relationships
create risks or opportunities for an entity,
they can affect the entity’s performanceor prospects, create or erode the value ofthe enterprise and the financial returns

to providers of financial capital, and thein the ISSB Exposure draft,interdependencies on othersustainability-related issues,

such as natural environment,
workforce, supply-chains,communities or customers into
its transition plan where they

are likely to be material for theentity in the short, medium or
long-term.

assessment of enterprise value by the
primary user”(ISSB IFRS S1 Par. 17)“Organisations should also

“When metrics cannot be measured directly

Given the forward-looking

assumptions, uncertainties,

uncertainty arises. The use of reasonableof estimates and uncertainties

consider describing theand key methodologies
associated with theirtransition plans”(TCFD Guidance on Metrics,
Targets and Transition
Plans, pg.43)

and can only be estimated, measurement
estimates is an essential part of preparing
sustainability-related metrics and does
not undermine the usefulness of theinformation if the estimates are accurately
described and explained. Even a highlevel of measurement uncertainty would

not necessarily prevent such an estimate

from providing useful information. An entity
shall identify metrics it has disclosed thathave significant estimation uncertainty,

disclosing the sources and nature of theestimation uncertainties and the factors
affecting the uncertainties.”(ISSB IFRS, S1 Par. 79)“An entity shall disclose information about

the assumptions it makes about the future,and other sources of significant uncertainty,
related to the information it discloses

about the possible effects of sustainabilityrelated risks or opportunities, when there issignificant outcome uncertainty.”(ISSB IFRS S1, Par. 83)

nature of transition plans, use

is an essential part of preparing
transition plan disclosures.

To maximise alignment withbroader sustainability-related

reporting norms, an entity should
use estimates where metrics

cannot be measured directly,

but clearly describe and explain
the estimates it has used. An

entity should seek to proactively
disclose the uncertainty,

assumptions, dependencies,

estimates and methodologies
contained within its transition
plan.

TPT Implementation Guidance

27

Disclosure principles
In addition, the TCFD has set out Principles of Effective Disclosures, which the TPT recommends
applying when preparing transition plan disclosures.
		 1) Represent relevant information
		2) Be specific and complete		3) Be clear, balanced, and understandable		4) Be consistent over time		5) Be comparable among companies within a sector industry or portfolio		6) Be reliable, verifiable, and objective		7) Be provided on a timely basis

2.5 Disclosure guidance: How to interpret the TPT Disclosure Framework
The TPT’s Framework provides a structure thatof each Sub-Element. Building on the baseline oftargets and transition plan align with its strategy.

each Sub-Element of the Framework recommends

enables an entity to communicate how its climate
The TPT’s Framework should support external users
and preparers alike.

This section steps through the TPT’s Framework

and provides additional interpretative guidanceon what an entity should include in disclosures inorder to meet the disclosure recommendations

the TCFD, the guidance further elaborates where

further granularity beyond the TCFD recommended
disclosures and guidance on transition plans. A

detailed mapping assessment against the relevant
TCFD excerpts and proposed ISSB’s Proposed IFRSS2 Exposure Draft can be found in the TechnicalAnnex [link] to the Implementation Guidance.

Note for preparers: The TPT Disclosure Framework is sector-neutral. When disclosing, an entity should use its

judgement to apply the sector-neutral Sub-Elements as relevant to their sector and business model. It should thendisclose in accordance with the Framework, having regard to the corporate reporting norms set out in Chapter 2.4.

18) N ote, the ISSB is reviewing the definition of materiality in its exposure drafts, including removing the term ‘enterprise value’. The TPT will monitor thesedevelopments and reflect respective updates in future iterations of our Implementation Guidance.
19) F or guidance on how to assess materiality, reporting entities may find the IFRS Practice Statement 2 and Section 5 of the FRC Guidance on the Strategic
Report helpful.

TPT Implementation Guidance

28

Disclosure recommendation

Sub-element

1.

Foundations
1.1

Objectives and priorities

Describe the strategic ambition of the entity’s transition plan by disclosing its objectives, priorities, interim

targets and milestones for responding and contributing to an early and orderly whole-of-economy transition.
The entity should have regard to reducing its own GHG emissions, responding to its climate-related risks andopportunities, and the actions it may take within its business model to embed and accelerate the transition.

Describe the strategic ambition of the entity’s transition plan by disclosing its objectives and priorities forresponding and contributing to an early and orderly whole-of-economy transition, and interim targets andassociated milestones. This should include: he entity’s objectives and priorities for reducing its GHG emissions. This should include interim and• T
long-term targets to reduce GHG emissions over time across emissions Scopes 1, 2, and 3. Interim

GHG reduction targets are defined as 5–10 years from when the target is set. If the entity excludes any
relevant scopes or categories of emissions from its GHG reduction targets, it should state the reason
for omitting these scopes or categories and outline any steps it is taking to enable target-setting forrelevant scopes or categories.

 he entity’s objectives and priorities for responding to the physical and transition risks as well as the• Topportunities associated with the transition to a net zero economy and the changing climate.

 he objectives and priorities the entity has set, consistent with its constitutional documents and the• T
duties of its directors and senior managers, to use other levers it has available to help embed andaccelerate the transition. These may include objectives and priorities related to investing in low-carbon
technologies, engagement activities, lending, or investment objectives.

In describing the entity’s objectives and priorities, disclose any interim targets and milestones used tomeasure progress.

The entity should also describe any potential trade-offs between these objectives and priorities that the

TCFD additionality

entity has identified.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceby proposing the following disclosure recommendations:• S pecifying that an entity should prepare GHG emissions reduction targets across all three scopes, andset interim targets, which are defined as 5-10 years from when the target is set.

• S pecifying where an entity is excluding Scope 3 emission categories, state the reason for omitting themand outline any steps it is taking to enable target-setting for relevant Scope 3 emission categories.

• W idening the understanding of a transition plan beyond the focus on GHG reduction targets, byrecommending that an entity also discloses a broader set of objectives and priorities for responding andcontributing to an early and orderly whole-of economy transition. This includes objectives and priorities
for responding to climate-related risks and other levers it has available to help embed and accelerate
the transition.

TPT Implementation GuidanceInterpretative guidance

29

Under this Sub-Element, the entity should describe the objectives and priorities and interim goals that

underpin its entire transition plan. The remainder of the plan’s content should then be aligned towards

achieving the objectives and priorities outlined under this Sub-Element. That is, the objectives and priorities
should be translated into a detailed, action-oriented 2. Implementation Strategy and 3. Engagement
Strategy. The suite of 4. Metrics and Targets that the entity uses to hold itself to account should becalibrated to allow meaningful measurement of progress against its strategic ambition and associatedobjectives and priorities. Finally, the 5. Governance and resourcing arrangements it puts in place should bedesigned to facilitate delivery against stated objectives and priorities.

The entity’s disclosures should include clear references to the entity’s objectives and priorities across thethree inter-related channels set out in the Disclosure Framework. Building from its baseline GHG emissions
profile, calculated in accordance with the GHG Protocol, the entity’s disclosure should outline its ambition
with regard to:		 o D ecarbonisation. Here, the entity should provide its interim and long-term targets to reduce
GHG emissions, across its Scope 1, 2 and 3 emissions. For example, an entity may disclose atarget to reduce Scope 1 and 2 emissions by 65% by 2030 and reduce its Scope 3 emissions by

50% by 2030, and reach net zero by 2050. Where an entity excludes particular Scope 3 emissions
categories from its target (e.g., due to challenges of data availability or because theseemissions are not material), it should state the reason for omitting them and, where relevant,outline any actions it is taking to enable target setting for relevant Scope 3 categories.

		 o R esponding to climate-related risks and opportunities. Having assessed climate-relatedrisks and opportunities with reference to an assumed net zero pathway in its wider TCFD

reporting, the entity should describe any objectives and priorities it has set to respond toclimate-related risks and opportunities and contribute to an economy-wide transition. For

example, an entity may define objectives and priorities for supplier engagement, to accelerate
the decarbonisation of entities in its value chain and reduce exposure to reputational risks or
possible carbon price shocks.

		 o C ontributing to economy-wide transition. Based on the outcome of a detailed assessment of
the levers at its disposal – e.g., through its business model, its products and services, its value

chain relationships, and its wider sphere of influence – the entity should describe its committed

actions to help embed and accelerate a whole-of-economy transition. These may, for instance,

include offering financing for climate solutions in hard-to-abate sectors, setting net zero aligned
lending or investment objectives, or capital expenditure in innovative climate solutions throughresearch and development.

Depending on the size, sector and location of the entity, the emphasis of this ambition may reasonably
focus on only a subset of these channels. For instance, a technology company providing solutions tocompanies in hard-to-abate sectors that help them manage their energy usage may have relatively Iow
Scope 1 and 2 GHG emissions, but significant opportunities to help embed and accelerate a whole-of-

economy transition by adapting and expanding these solutions. In all cases, however, users of the entity’stransition plan will want to understand how the entity has considered its profile and the levers available
under all three channels.

Finally, the entity should also consider how the actions it takes under each channel interact. Where potential
trade-offs between the objectives and priorities relating to each channel are identified, these should be
described.

TPT Implementation Guidance

Disclosure recommendation

Sub-element30

1.2 Business model implications
 ummarise how the entity will embed the strategic ambition of its transition plan in its business model,
Shighlighting key implications for products and services, resourcing and operational and capital expenditure, as
well as material interdependencies for the natural environment, the entity’s workforce, value chain, impacted
communities and consumers.
Summarise how the objectives, priorities, interim targets and milestones outlined under 1.1 Objectives andpriorities will be embedded in the entity’s business strategy. This should include:• A n overview of the key implications of the transition plan for the entity’s business model, including

implications for products and services, acquisitions or divestments, any high-level implications forresource allocation and operational and capital expenditure, and the timeframe over which key actions
will be taken.

• A summary assessment of the entity’s material interdependencies, including the significant risks to, andopportunities for, the natural environment and stakeholders such as the entity’s workforce, suppliers,
impacted communities and customers arising from the objectives and priorities outlined under 1.1
Objectives and priorities.

A summary description of steps that the entity is taking, or planning to take, to mitigate these significant risks

or leverage opportunities for the natural environment and stakeholders such as the workforce, supply chains,

TCFD additionality

communities or customers.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceby proposing the following disclosure recommendations:• A rticulation of the business model implications of the plan for products and services, resource allocationand operational and capital expenditure.

 pecification of the material interdependencies of the changing strategy to a low-carbon transition,• S

including significant risks to and opportunities for the natural environment and stakeholders such as an

Interpretative guidance

entity’s workforce, suppliers, impacted communities, and customers.

Under this Sub-Element, the entity should clearly articulate how it will embed its transition plan into its businessmodel and strategy. This should include implications for products and services, high level implications forresource allocation and operational and capital expenditure, and detail on the timeframe over which key actions
will be taken. In essence, this Sub-Element is intended to provide a summary of key priority changes the entity

plans to make, with these then elaborated under 2. Implementation Strategy, 3. Engagement Strategy and 5.
Governance.

For example, an entity may consider disclosing:• A high-level summary of expected shifts in its portfolio of products and services (e.g., moving from oil andgas production to renewable energy generation and electricity retail).

• An overview of expected changes to resource allocation (e.g., changes resulting from changes in demandor supply, or new business lines; arising from business development through capital expenditures oradditional expenditure on operations or research and development; acquisitions and divestments). This

could include plans and critical assumptions for legacy assets, including strategies to manage carbon-

energy and water-intensive operations, and to decommission carbon-energy and water-intensive assets.
• Over what time periods these implications are expected to occur and how these are linked to the entity’s
strategic planning horizon.

In addition, the entity should disclose a summary assessment of material interdependencies including thesignificant risks to, and opportunities for, the natural environment and stakeholders such as the entity’s workforce,
impacted communities, suppliers, clients and customers.

For example, where an entity’s transition plan objectives and priorities involve a significant change in its suiteof products and services, it may need to invest in new production facilities. This may in turn have adverse
implications for the natural environment or communities upstream in its value chain, which may lead to
reputational or litigation risks with potential financial implications for the entity.

TPT Implementation Guidance

31

Disclosure recommendation

Sub-element

2. Implementation Strategy
2.1 Business planning and operations
Disclose the roadmap of short-, medium, and long-term actions the entity will take to deliver on the strategic

ambition in its transition plan and achieve its stated objectives and priorities, including details of key plannedchanges to its business strategy and resource allocation, plans for GHG or carbon energy-intensive assets, andits approach to managing material interdependencies.

Disclose the roadmap of short, medium- and long-term actions (supported by a change managementplan) the entity is taking or plans to take to implement its transition strategy and achieve the priorities andobjectives outlined under 1. Foundations. This includes information on the changes the entity is making in its
business strategy and resource allocation.
This may further include:• plans and timelines to manage or phase-out GHG or carbon-energy intensive assets; and• information about any actions planned to mitigate any significant risks to, and leverage opportunities
for, the natural environment, the entity’s workforce, suppliers, impacted communities and consumers.

Where possible, quantify the contribution of each business and operational action towards achieving theobjectives and priorities outlined under 1. Foundations. Where quantification is not possible, explain why thisis the case and provide a qualitative description instead.

The entity should disclose what they consider to be the relevant short-, medium- and long-term time.

The TPT recommends that the short-term is defined as within the next three years. This would align withthe recommended publication cycle of standalone transition plans. If the entity defines short-term as

TCFD additionality

exceeding three years, it should provide an explanation for why this is the case.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceby proposing the following disclosure recommendations:• S pecifying that the relevant short-term time horizon is defined as within the next three years. Asking an
entity to provide an explanation if the short-term time horizon is defined as exceeding three years.

• R equesting information on any actions planned to mitigate any significant risks to, and leverage
opportunities for, the natural environment, the organisation’s workforce, suppliers, impacted
communities and consumers.

• S pecifying that an entity should disclose quantitative or qualitative information about the actions’Interpretative guidance

expected contribution to achieving its objectives and priorities.

Under this Sub-Element, the entity should disclose the roadmap of steps being taken over the short-,

medium- and long-term to deliver on the strategic ambition in its transition plan and achieve its statedobjectives and priorities disclosed under 1.1 Objectives and priorities and how these changes will deliver theambition highlighted under 1.2 Business model implications.

Key aspects of the business planning and operational actions may include:• plans and timelines to phase-out GHG or carbon-energy-intensive assets;• actions planned to develop and scale up climate solutions; and ctions planned to manage the significant risks to, and leverage opportunities for, the natural• aenvironment and stakeholders such as the workforce, supply chain, communities and customers thatarise from the plan.

This Sub-Element further requires the entity to, where possible, quantify the contribution of these actions towards
achieving the objectives and priorities outlined under 1. Foundations. For example, the entity may include anestimate of the expected emissions reduction expected from each activity. Where quantification is not possible,
the entity should provide an explanation why this is the case and provide a qualitative description instead.

TPT Implementation Guidance

32

Finally, this Sub-Element asks the entity to be transparent about how it defines the relevant short-,

medium- and long-term time horizons. To encourage early action, the TPT recommends that the short-term is defined as no longer than three years. This would align with the recommended publication cycle ofstandalone transition plans (see Chapter 2.2 - Location of transition plan reporting).

In addition, the entity may consider disclosing further information to help users understand the credibilityof this Sub-Element, including:• A list of the entity’s physical assets that are most material to its business model, which are exposed

to both transition and physical climate risks and opportunities, including further details that can help
users assess whether the entity’s plans to manage or phase-out GHG- or carbon-energy-intensive
assets are comprehensive and credible. Such details may include exact geolocation, ownershipshare, production type, capacity, technology, age, and the remaining operational lifetime.

• Possible trade-offs that arise from implementing these plans, such as possible increases in shortterm emissions that result from actions that are necessary for delivering long-term emissions

reduction across the operations (e.g., emissions incurred in purchasing and transporting materials

to retrofit a building, emissions incurred by keeping GHG or carbon-energy intensive activities in theportfolio to ensure a managed, earlier phase-out).

Disclosures under this Sub-Element may be complemented by and reflected in disclosures under 2.4

2.2 Products and services
Disclose planned changes to the entity’s portfolio of products and services to deliver the strategic ambition inits transition plan, highlighting plans to reduce (increase) the portfolio of high-carbon (low-carbon) products

Disclosure recommendationand services that it provides, either directly or indirectly.

Disclose plans to change the entity’s portfolio of products and services to support the objectives

TCFD additionality

Sub-element

Financial planning and 5. Governance.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidance

and priorities and interim milestones outlined under 1. Foundations. This may include plans to reduce(increase) the portfolio of high-carbon (low-carbon) products and services that it provides, either directly
or indirectly.

Where possible, quantify the impact of these planned changes in the portfolio of products and services
towards achieving the company’s objectives outlined under 1. Foundations. Where quantification is notpossible, explain why this is the case and provide a qualitative description instead.

by proposing the following disclosure recommendations:• S pecifying that an entity may consider disclosing changes to its portfolio of products and services.
• S pecifying that an entity may consider quantifying the impact of the plans with reference to GHG
reduction targets and other transition objectives and priorities.

TPT Implementation GuidanceInterpretative guidance33

As part of its transition plan, the entity may make changes to the portfolio of products and service it
offers (including financial products and services).

Under this Sub-Element, the entity should disclose planned changes to its portfolio of products andservices and how it anticipates this will help deliver its strategic ambition.
For example, this may include:• Plans to increase the portfolio of low-carbon products (e.g., increasing the share of plant-based
products sold); and• Plans to phase-out high-carbon products and services (e.g., phasing out the sale of vehicles withtraditional internal combustion engines).

To ensure users are able to understand and evaluate these plans, the entity should disclose any tools ordefinitions it has used to classify or define products and services as, for example, low-carbon or green(e.g., by reference to an appropriate taxonomy or other certification).

This Sub-Element further requires the entity to, where possible, quantify the contribution of these plans
towards achieving the objectives and priorities outlined under 1. Foundations. For example, the entity

may provide an estimate of the expected impact that phasing out more GHG-intensive products overthe next five years will have on its GHG emissions profile. Where it is not possible to quantify impact, theentity should disclose why it is not able to do so and provide a qualitative description instead.

In addition, the entity may also disclose how it has considered any trade-offs in developing plansto change its portfolio of products and services. For example, an entity may have faced a trade-off
between focusing on short-term change to products and services versus focusing on investing inresearch and development that might increase emissions in the short-term but ultimately lead to theavailability of products and services with greater mitigation potential.

TPT Implementation Guidance

Disclosure recommendation

Sub-element34

2.3 Policies and conditions
Disclose key internal policies and conditions that the entity has developed to align its activities with thestrategic ambition of its transition plan, and its stated objectives and priorities, including those that relate
to energy and water usage, the management of its impact on the natural environment, lending andinvestment activity and the profile of companies in its supply chain.

Disclose internal policies and conditions that are used to guide business, financial, and operational
planning, and actions. This may include policies related to:• energy usage;• deforestation;• climate-related requirements for suppliers;• climate-related requirements or restrictions on lending and investment activities;• engagement policies; and• s afeguards that are in place to address any risk of significant harm to a wide range of entities,
including the natural environment, workforce, supply chain, communities or consumers.

Describe how these policies are supporting the objectives, priorities and interim milestones disclosed
in 1. Foundations and/or support actions and plans disclosed in 2. Implementation Strategy and 3.

TCFD additionality

All aspects of this Sub-Element of the TPT Disclosure Framework go beyond the TCFD recommendations andInterpretative guidance

Engagement Strategy.

Across sectors, entities may establish internal policies that drive decisions and actions to align with theirguidance on transition plans. In particular, an entity should consider disclosing those policies and conditions
used to guide business, financial, and operational planning and actions. An entity should consider thosepolicies which are focused on specific topics relevant to climate transition planning.

strategic ambition and the stated objectives and priorities described in 1. Foundations. Under this SubElement, the entity should disclose such key policies and conditions.

Internal policies and conditions disclosed under this Sub-Element may relate to a range of topics relevantto the effective delivery of the transition plan and achievement of the entity’s strategic ambition. This may
include:• Policies governing the entity’s internal operations (e.g., deforestation commitments, policies regarding
business travel, investment conditions, technology requirements etc.).

• Policies governing decision-making relating to suppliers or the wider value chain (e.g., exclusion
policies for value chain providers, climate-related requirements for suppliers).

• Investment conditions (e.g., exclusion commitments for new oil and gas production, transition-related
due diligence requirements, engagement commitments, etc.).

• Engagement policies (e.g., public commitments to align lobbying activities with the goal of restricting
global temperature rise to 1.5C above pre-industrial levels)

Policies and conditions may also address the interdependencies, including the significant risks to, andopportunities for, the natural environment and stakeholders such as the entity’s workforce, suppliers,

impacted communities and customers (e.g., safeguards to address potential biodiversity loss, support

nature-based solutions with biodiversity co-benefits, commitments to paying the Real Living Wage etc.). In
these areas too, policies and conditions may impose checks and balances for relevant decision-makers,

such as due diligence and pre-consultation obligations, or quantitative assessment of measured impacts.
In disclosing relevant policies and conditions, the entity should explain how these support the objectives,priorities and interim targets and milestones disclosed in 1. Foundations and/or support actions and plans

disclosed in 2. Implementation Strategy and 3. Engagement Strategy. For example, the entity may consider
disclosing the objective of the policy, the nature and scope of activities to which it relates, the timeframe

over which it applies, how it is overseen, and relevant metrics and targets that are used to assess its impact.

TPT Implementation Guidance

Disclosure recommendation

Sub-element35

2.4 Financial planning
Describe the financial implications of the planned changes to the entity’s business strategy, resource

allocation and products and services arising from its transition plan, including relevant financial plans,investment and funding plans, where possible. 20

Disclose how the actions outlined in 2. Implementation Strategy and 3. Engagement Strategy will beresourced, as well as the projected impact of these actions on the entity’s financial position, performanceand cash flows, where possible. This includes:• Information on how it expects its financial position to change over time, given the actions it is planningto take to support the entity’s objectives and priorities outlined under 1. Foundations. This shouldreflect current and committed investments plans (including expected capital expenditure needs) andtheir anticipated effects on the entity's financial position, as well as its planned sources of funding to
implement its strategy.

• Information on how it expects financial performance to change over time, given its strategy to achieve
the objectives and priorities outlined under 1. Foundations (e.g., changes in revenues, operational

expenditures).

• Information regarding planned research and development activities for climate solutions.
Information regarding the use of internal carbon prices, including the levels of prices applied.
The entity should disclose quantitative information unless it is unable to do so. If the entity is unable to

TCFD additionality

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations andInterpretative guidance

provide quantitative information, it should provide qualitative information.

Under this Sub-Element, the entity should disclose how its transition plan will be resourced, as well as theguidance by proposing the following disclosure recommendations:• Suggesting that an entity considers disclosing how its transition objectives priorities, and interim goals,
and planned actions, are reflected in its financial plans.

• Suggesting that an entity considers disclosing the projected impact of the transition plan on current
and committed investment plans and their anticipated effects on the entity’s financial position.

projected impact of these actions on the entity’s financial position, performance and cash flows. This may
include:• The expected capital expenditure needs that arise from activities as outlined in 2.1 Business planningand operations and 2.2 Products and services, both in absolute terms and, where possible, relative tototal capital expenditure over the same time horizon.

• The expected investment needs for research and development activities that arise from activities as

outlined in 2.1 Business planning and operations and 2.2 Products and services, both in absolute terms

and, where possible, relative to total research and development expenditure over the same time horizon.
• Expected impacts of the transition plan on financial performance (changes to revenues and costs),

financial position (changes to assets and liabilities) and cash flow (changes to working capital). This
could include:		 o e xpected Impacts on operating costs (e.g., due to long-term utilities savings from investment inrenewable energy assets);

		 o e xpected impacts on revenues (e.g., due to shifts in the product portfolio, expected changes inprices etc.);

		 o e xpected impacts on profit margins (e.g., due to assumptions regarding the degree to whichchanges in costs can be passed through to consumers)20) This Sub-Element should be regarded as distinct from the disclosure recommendations under Sub-Element 4.2 Financial metrics and targets. Under 2.4
Financial planning, the focus should lie on demonstrating that the entity has credible resourcing plans to support the implementation of its transition plan.
Under Sub-Element 4.2 Financial metrics and targets, on the other hand, the entity should disclose the financial metrics and targets that it is using to assess
progress and delivery of the plan over time.

TPT Implementation Guidance36

		 o expected changes to asset valuations and asset lives as a result of delivering on thetransition plan, and subsequent impacts on depreciation policies and current and future
impacts on operating profits (depreciation and impairment costs);

		 o planned financing arrangements to support business continuity as the entity develops lowcarbon products and services, and material impacts on financing arrangements; and		 o one-off restructuring costs to align to a low-carbon target operating model including
investing in new systems, resourcing, training.

• Details on how the financial impacts outlined above could impact financial metrics, including

potential short-term trade-offs between transition activities and key financial metrics (e.g., profit
margins, net debt).

• An explanation of how the above impacts have been integrated into general purpose financial
reporting.

If appropriate, the entity may refer to the impact on financial position and performance in context ofthe entity’s operating segments, under IFRS8, to enable consistency between the transition plan and theentity’s general purpose financial reporting.

Assumptions should be included in financial reporting in accordance with the relevant accounting
standard.

Where the entity is unable to provide quantitative information, it should provide qualitative information

Disclosure recommendation

Sub-element

instead.

2.5 Sensitivity analysis
Disclose key assumptions and dependencies underlying the entity’s business, operational and financial
plans and the implications for achievement of the strategic ambition in its transition plan if its central
assumptions are not met.

Disclose the key assumptions underlying the plans outlined under 2.1 Business planning and operations, 2.2
Products and services and 2.4 Financial planning, the timeframes over which these are expected to occur
and how these assumptions are reflected in the company’s financial statements.
This may include key assumptions relating to:• policy and regulatory change;• technological developments;• shifts in client and consumer demand; and• the physical impacts of the changing climate.
Disclose the impact on the ability of the entity to achieve the objectives, priorities and interim milestones

TCFD additionality

outlined under 1. Foundations if these assumptions prove incorrect.

The TCFD recommends that an entity performs scenario analysis to identify how business strategies mightchange its response to climate-related risks and opportunities, and its resilience to climate-related risks andopportunities. The TCFD’s Transition Plan Guidance refers to scenario analysis, testing the achievability of theplan in different temperature pathways.

In the TPT's Implementation Guidance, the TPT recommend performing scenario analysis in Stage 1 of thetransition planning process – ‘Assessment of climate-related risks and opportunities’ in accordance with the
TCFD’s scenario analysis.

TPT Implementation Guidance

37

The TPT’s proposed sensitivity analysis is then a separate activity, to be performed once the transition plan has

been further developed. The TPT recommend performing sensitivity analysis in Stage 3 of the transition planning
process – ‘Financial planning and sensitivity analysis’.

Sensitivity analysis is aimed at understanding the key assumptions underlying an entity’s transition plan andthe impact that fulfilling the assumptions may have on the plan (including potential impact to the plan if

the assumptions are not realised). These assumptions could be impacted by the rate of the economy-wide
transition; impacting grid decarbonisation, demand drivers, development of technologies and, financial
implications from the physical impacts of the changing climate.

The TPT recommends that an entity discloses the impact on its ability to achieve its objectives, priorities andInterpretative guidanceinterim milestones if these assumptions prove incorrect.

Under this Sub-Element, the entity should disclose the assumptions that underpin the wider businessstrategy outlined under 2. Implementation Strategy. The entity should outline how these assumptions areincluded in the financial statements.

Given the forward-looking and long-term nature of transition planning, all entities will need to makekey assumptions or understand key dependencies when developing their plan. It is critical that whenassessing a transition plan, users can clearly identify these assumptions, make a judgment on whether

these are realistic assumptions to make, and understand the impact that not achieving the assumptions
may have on the plan. This will ultimately inform a user’s overall opinion on the ambition, robustness andfeasibility of achieving the plan. What the relevant key assumptions are is likely to vary significantly acrossentities, depending on their size, sector and geographic location, However, the entity can be expected tomake key assumptions in relation to areas such as:• Policy and regulatory change – this could include assumptions around how policy and regulatorychange will, for example, subsidise the cost of investing in climate solutions or incentivise certain

demand-side behaviours. Attached to this, assumptions will need to be made around the level ofinternational harmonisation of policy and regulatory change. The entity may use this Sub-Element
to communicate the dependencies of its transition plans on key policy changes.

• Technological developments – this could include assumptions around technological innovationor costs, and how these will allow, for example, for the entity to change their products and services
portfolio (as outlined in 2.2 Products and services), or reduce the capital expenditure required toacquire, maintain and upgrade fixed assets (as outlined in 2.4 Financial planning).

• The physical impacts of the changing climate – this could include assumptions around changing
precipitation patterns and how this may impact access to water required for their operations
planned under 2. Implementation Strategy.

• Shifts in client and consumer demand – this could include assumptions around how client andconsumer behaviour will evolve over time. For example, the entity would need to make assumptions
around the level of demand for new and existing 2.2 Products and services.

In addition, the entity should disclose the implications for the delivery of their plan and the overarchingachievement of the plan’s strategic ambition as stated in 1.1 Objectives and priorities, if the statedassumptions are not realised. This can be achieved by considering and disclosing how delivery of theplan might be impacted by the realisation of a different set of assumptions.

TPT Implementation Guidance

38

3.1 Engagement with value chain
Disclose current and planned engagement activities with companies and customers in the entity’s value
chain or portfolio to provide support and feedback, and to influence behavioural and business model

Disclosure recommendation

Disclose current and planned engagement and activities conducted with both downstream and

TCFD additionalitychanges aligned with the entity’s strategic ambition and stated objectives and priorities.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceInterpretative guidanceSub-element

3. Engagement Strategy

The entity may take action to encourage suppliers to reduce their respective emissions, alter

upstream entities in the entity’s value chain (e.g. suppliers, distributors, final customers and portfolio

companies) to drive reductions of GHG emissions and/or deliver the objectives, priorities and milestones
outlined in 1. Foundations.

Disclose the expected impact of these engagement activities on the delivery of the objectives, priorities
and milestones outlined in 1. Foundations.

by proposing the following disclosure recommendations:• S uggesting that an entity considers disclosing current and planned engagement activities to influence
behavioural and business model changes, which are aligned with an entity’s strategic ambition andstated objectives and priorities.

procurement processes or engage with customers to increase demand for low-carbon products

and services. Under this Sub-Element the entity should disclose its current and planned approach toengagements with companies and customers within its value chain, including where relevant, how theseengagements support the entity’s strategic ambitions. The entity should therefore explain the type ofengagement activities it is pursuing, as well as the desired outcomes of such activities and how these
are linked to objectives, priorities and interim goals as set out in 1. Foundations.

To support users in assessing the credibility and potential impact of such engagement actions, the entity

may consider breaking down this disclosure by target audience (e.g., downstream/upstream, sub-groupsof suppliers, customer groups etc.).

TPT Implementation Guidance

Disclosure recommendation

Sub-element39

3.2 Engagement with industry
Disclose current and planned engagement and collaborative activities with peers in the entity’s industry (andbeyond, as relevant) to share expertise and experience and address common challenges in support of the entity’s
strategic ambition and stated objectives, priorities and interim milestones.

Disclose current and planned engagement and collaborative activities with peers in the entity’s industry(and beyond, as relevant). This should include:• D isclose membership of trade organisations, as well as current and planned engagement with tradeorganisation(s) to influence the trade organisation(s) adoption of transition policies that support theobjectives outlined in 1. Foundations.

• D isclose whether and how the entity ensures that the commitments and actions of the entity’s tradeorganisation(s) support and do not undermine the objectives, priorities and interim milestones
outlined in 1. Foundations.

• D isclose current and planned engagement with other entities (including both peers and otherrelevant entities), and how these engagements support- and do not undermine - the objectives,priorities and interim milestones outlined in 1. Foundations.

• D isclose current and planned engagement with industry initiatives; include requirements thecompany has chosen to comply with because of these initiatives, and how these engagement

TCFD additionality

All aspects of this Sub-Element of the TPT Disclosure Framework provide further granularity beyond the TCFD

Interpretative guidance

activities support - and do not undermine - the objectives and priorities outlined in 1. Foundations.

Under this Sub-Element, the entity should disclose its approach to engagement and collaboration withrecommendations and guidance on transition plans.

peers in, and where relevant beyond, the entity’s industry to share expertise and address common
challenges in support of the entity’s stated objectives, priorities and interim goals as outlined in 1.

Foundations. As outlined above, this should cover both engagement with individual companies, as well aswith trade organisations and other industry initiatives.

More specifically, the entity should disclose a summary of:• Membership in trade organisations, as well as current and planned engagement with tradeorganisations (e.g., engagement to influence the climate advocacy positions of trade organisations
that it is a member of).

• Whether and how it ensures that trade organisations support and do not undermine the objectives,priorities and interim goals outlined in 1. Foundations (e.g., actions the entity takes to address

misalignments between a trade organisations advocacy position and its own objectives, priorities
and interim goals).

• Current and planned engagement with other entities.
• Current and planned engagements with other individual companies and how these engagements
support the entity’s objectives, priorities and interim goals (e.g., engagement to align climate
advocacy positions with peers).

• Current and planned engagement with voluntary industry initiatives, including requirements that thecompany has chosen to comply with because of these initiatives (e.g., participation in a Race to Zeroalliance, Mining 2030, Climate Action 100+, Responsible Steel or the Oil and Gas Climate Initiative).

TPT Implementation Guidance

3.3 Engagement with government, public sector and civil society
Disclose current and planned engagement activities with the government, public sector organisations

Disclosure recommendation

Disclose the entity’s current and planned engagement activities with government, regulators, public sector

TCFD additionality

and civil society to support the entity’s strategic ambition and objectives, priorities and interim milestones.

All aspects of this Sub-Element of the TPT Disclosure Framework provide further granularity beyond the TCFD

Interpretative guidanceSub-element

40

Under this Sub-Element, the entity should disclose any current and planned direct and indirect climate-relatedorganisations and civil society. This disclosure should cover information on both direct climate-related

policy engagements and indirect climate-related policy engagements (e.g., via industry associations).
Disclose how these engagement activities support- and do not undermine- the objectives, priorities andinterim milestones outlined in 1. Foundations.

recommendations and guidance on transition plans.

policy engagement activities with the government and/or public sector and explain how these are aligned with
objectives and priorities outlined in 1. Foundations.
For example, disclosures may include:• Information on the climate-related advocacy positions of current and planned direct policy
engagement activities.

• Information on the climate-related advocacy positions of industry associations that the entity is amember of.

• An assessment of whether and how these are aligned with the objectives, targets and interim goals set
by the entity (e.g., support decarbonisation in line with a 1.5C trajectory).

• Any commitments made to align lobbying activities with the objectives, targets and interim goals set by
the entity (e.g., public comment to align lobbying activities with a 1.5C trajectory) (see 2.3 Policies andconditions).

• Further information that may be helpful for users to assess the alignment of policy engagement with theobjectives, targets and interim goals defined by the entity (e.g., a breakdown of lobbying activities acrosstarget audiences, for example regional vs. national governments, or pursued outcomes, such as policy
positions pursued).

• The relevance and impact of these engagement activities on the effective delivery of the objectives,
targets and interim goals outlined in 1. Foundations.

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41

Disclosure recommendation

Sub-element

4. Metrics &Targets
4.1 Governance, business and operational metrics and targets
Disclose the governance, business and operational metrics and targets used by the entity to assess

progress towards its strategic ambition and its stated objectives and priorities. Report against metrics used
to assess progress towards targets on at least an annual basis.

Disclose the governance, business and operational metrics and targets that the entity is using to set theirambition and monitor progress of their transition plan, outlining how these reflect the objectives and priorities
outlined under 1. Foundations and relate to the actions outlined under 2. Implementation Strategy and 3.

Engagement Strategy.

To the extent possible, for each target defined, the entity should disclose:• the objective of the target;• whether this target is an absolute or an intensity target;• the period over which the target applies;• the base period and measurement from which progress is measured;• f or medium to long-term targets, any milestones or interim targets (interim targets are defined as 5-10
years from when the target is set);• the metric used to assess progress towards reaching the target;• the relevant units, methodologies and definitions on which this metric relies; andTCFD additionality• the extent to which these metrcs rely on measured vs. estimated data.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceby proposing the following disclosure recommendations:• S pecifying that an entity may consider governance, business and operational metrics and targets
specifically to monitor progress of delivery of its transition plan.

• S pecifying that an entity may consider disclosing how the metrics and targets link to the objectives,priorities and strategies outlined across its transition plan.

• Specifying additional disclosure criteria:
		 o the metric used to assess progress towards reaching the target;		 o the relevant units, methodologies and definitions on which this metric relies;		 o the extent to which these metrics rely on measured vs. estimated data;		 o the objective of the target; and		 o for medium to long-term targets, any milestones or interim targets (defined as 5-10 years fromInterpretative guidance

when the target is set).

Under this Sub-Element, the entity should disclose relevant and decision-useful governance, business andoperational metrics and targets that can be used to measure the progress and delivery of the transition

plan. Well-formulated governance, business and operational metrics and targets should be clearly linked
to the objectives and priorities outlined under 1. Foundations and/or the planned actions outlined under

2. Implementation Strategy and 3. Engagement Strategy. As relevant to the entity’s business, sector andstrategy, these may include:• Metrics and targets related to operations and processes, such as:		o energy efficiency (e.g., EJ of energy/ unit produced);		o water intensity of production (e.g., water use /unit produced); and		o proportion of business activities and operations vulnerable to transition and physical risks, andassociated targets (e.g., for: water utilities: wastewater treatment capacity located in 100-year
flood zones).

TPT Implementation Guidance

42• Metrics and targets related to products and services, such as:		o products and/or services that are low-carbon or support the transition towards a low-carbon		o proportion of products and services vulnerable to transition and physical risks, and associatedeconomy (e.g., for automotive sector: number of zero- or low-emissions vehicles sold); andtargets (e.g., for retail banking: number and value of mortgage loans in 100-year flood zones;
for aviation: proportion of revenue passenger kms not covered by Carbon Offsetting andReduction Scheme for International Aviation (CORSIA)).

• Metrics and targets related to engagement activities, such as:		o amount of funding deployed towards lobbying governments on climate-related legislation;		o number and types of climate-related engagement activities (by supplier/portfolio and/or by		o outcomes, such as percentage of climate-related engagements that led to a material positive		o number of advocacy engagements with governments and policymakers on climate-related

topic/theme);change in company operations/activities; andpolicies and outcomes;

 etrics and targets related to managing material interdependencies, i.e., that are used to assess• M

the success of actions taken to manage the significant risks to, and leveraging the opportunities forthe natural environment, the entity’s workforce, suppliers, impacted communities and consumers

arising from the short-medium-and long-term objectives and priorities, such as metrics and targets
recommended by the TNFD).

• Metrics and targets related to internal governance processes, such as:		o proportion or number of individuals with remuneration linked to progress against the objectives		o proportion of executive remuneration that is linked to progress against the objectives andand priorities of the transition plan; andpriorities of the transition plan.

Under this Sub-Element, the entity should further provide a series of details about its metrics and targets
to help ensure that these are decision-useful and understandable. Most importantly, the entity should
explain the selection of metrics, and how these are linked to the rest of the plan. In addition, the entity

should be transparent about underlying definitions that are applied (e.g., categorisation of low-carbon/
green products and services, referencing appropriate taxonomies or other certifications) and the typesof measurements used to derive metrics (including whether the underlying data comes from direct

Disclosure recommendation

Sub-element

measurements, reported data from other entities, or proxy indicators).

4.2 Financial metrics and targets
Disclose the financial metrics and targets that are used by the entity to assess progress towards its

strategic ambition and its stated objectives and priorities. Report against metrics used to assess progress
towards targets on at least an annual basis.

Disclose the financial metrics and targets that the entity is using to set their ambition and monitor

progress of their transition plan. The entity should further outline how these reflect the objectives andpriorities outlined under 1. Foundations and relate to the actions outlined under 2. Implementation
Strategy and 3. Engagement Strategy.

TPT Implementation Guidance

43

For each target, the entity should disclose:• the objective of the target;• whether this target is an absolute or an intensity target;• the period over which the target applies;• the base period and measurement from which progress is measured;• for medium to long-term targets, any milestones or interim targets (interim targets are defined as 5-10
years from when the target is set);• the metric used to assess progress towards reaching the target;• the relevant units, methodologies and definitions on which this metric relies; andTCFD additionality• the extent to which these metrics rely on measured vs. estimated data.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidance byproposing the following disclosure recommendations:• S pecifying that an entity considers disclosing financial metrics and targets specifically to monitor progressof delivery of its transition plan.

• S pecifying that an entity clarifies how the metrics and targets link with its transition plan’s objectives,priorities, and actions.

• Specifying additional disclosure criteria:
		 o the metric used to assess progress towards reaching the target;		 o the relevant units, methodologies and definitions on which this metric relies;		 o the extent to which these metrics rely on measured vs. estimated data;		 o the objective of the target; and		 o for medium to long-term targets, any milestones or interim targets (defined as 5-10 years from whenInterpretative guidance

the target is set).

Under this Sub-Element, the entity should disclose relevant and decision-useful financial metrics and targets
that are used to assess progress and delivery of the plan. Well-formulated financial metrics and targets

should be clearly linked to the objectives and priorities outlined under 1. Foundations and/or the planned

actions outlined under 2. Implementation Strategy and 3. Engagement Strategy. As relevant to the entity’sbusiness, sector and strategy, these may include:• metrics and targets on no- or low-GHG capital expenditures;• metrics and targets on revenues from no- or low-GHG products and services;• metrics and targets regarding the proportion of low- or no-GHG (financial) assets;• metrics and targets on procurement from no- or low GHG suppliers; and• metrics and targets on no- or low- GHG R&D investments.
Under this Sub-Element, the entity should further provide a series of details about its metrics and targets to

help ensure that these are decision-useful and understandable. Most importantly, the entity should therefore
explain the selection of metrics, and how these are linked to the rest of the plan. In addition, the entity shouldbe transparent about underlying definitions that are applied (e.g., categorisation of low-carbon/green

products and services, referencing appropriate taxonomies) and the types of measurements used to derive

metrics (including whether the underlying data comes from direct measurements, reported data from otherentities, or proxy indicators).

TPT Implementation Guidance

Disclosure recommendation

Sub-element44

4.3 GHG emissions metrics and targets
Disclose the GHG metrics and targets that are used by the entity to assess progress towards its strategic

ambition and its stated objectives and priorities. Report against metrics used to assess progress towards
targets on at least an annual basis.

Disclose the GHG emissions metrics and targets that the entity is using to set their ambition and monitor
progress of their transition plan. The entity should further outline how these reflect the objectives andpriorities outlined under 1. Foundations and relate to the actions outlined under 2. Implementation
Strategy and 3. Engagement Strategy.
Metrics
Disclosures on GHG emissions metrics should include:• A bsolute gross GHG emissions generated during the reporting period, measured in accordancewith the Greenhouse Gas Protocol Corporate Standard, and Corporate Value Chain Standard
expressed as metric tonnes of CO2 equivalent, classified as Scopes 1, 2 and 3 emissions.

• G HG emissions intensity for each scope, expressed as metric tonnes of CO2 equivalent per unit ofphysical or economic output, classified as Scopes 1, 2 and 3 emissions.

• The extent to which these metrics rely on measured vs. estimated data.
Targets
Disclosures on GHG emissions targets should include:• absolute gross GHG emissions reduction targets for Scopes 1 and 2;• absolute gross GHG emissions reduction targets for Scope 3;• G
 HG emissions intensity targets expressed as metric tonnes of CO2 equivalent per unit of physicalor economic output for Scopes 1 and 2;• G
 HG emissions intensity targets expressed as metric tonnes of CO2 equivalent per unit of physicalor economic output for Scopes 3; and• any additional GHG emissions targets that the entity has set (e.g., methane reduction targets).
For each of the targets above, the entity should disclose:• the objective of the target;• whether this target is an absolute or an intensity target;• the period over which the target applies;• the base period and measurement from which progress is measured;• f or medium to long-term targets, any milestones or interim targets (interim targets are defined as
5-10 years from when the target is set);• the metric used to assess progress towards reaching the target;• the relevant units, methodologies and definitions on which this metric relies; and• the extent to which these metrics rely on measured vs. estimated data.
For Scope 3 emissions, which are disclosed in accordance with 4.3 GHG emissions metrics and targets:• The entity should include upstream and downstream emissions in its measure of Scope 3 emissions.
• The entity should disclose the categories included within its measure of Scope 3 emissions.
• W hen the entity’s measure of Scope 3 emissions includes information provided by entities in its
value chain, it should explain the basis for that measurement.

• If the entity excludes categories of Scope 3 emissions from its metrics and targets, it should state
the reason for omitting them, and any steps it is taking to improve monitoring and reporting
systems and enable target setting for relevant Scope 3 emission categories.

TPT Implementation Guidance

TCFD additionality

45

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceby proposing the following disclosure recommendations:• Specifying the reason for excluding Scope 3 categories from GHG emissions and metrics and targets,and steps that an entity is taking to improve monitoring and reporting systems and enable target
setting for relevant Scope 3 emission categories• Specifying the supplementary information that an entity should disclose about its GHG emissions

metrics and reductions targets including the coverage of the targets, the alignment with international
agreements and any national target and strategy on climate change.

• Specifying additional disclosure criteria:
		 o the metric used to assess progress towards reaching the target;		 o the relevant units, methodologies and definitions on which this metric relies;		 o the extent to which these metrics rely on measured vs. estimated data;		 o the objective of the target; and		 o for medium to long-term targets, any milestones or interim targets (defined as 5-10 years fromInterpretative guidance

when the target is set)

Under this Sub-Element, the entity should disclose its GHG emissions and any long-term and interim GHG
emissions reduction targets (interim is defined as 5–10 years from when the target is set).

Metrics: Under this Sub-Element, the entity should annually report its GHG emissions across Scopes 1, 2

and 3 in accordance with the GHG Protocol’s Corporate Accounting and Reporting Standard and the GHG

Corporate Value Chain (Scope 3) standards, which are intended to ensure a faithful, true, and fair accountof an entity’s GHG emissions21. In addition, this Sub-Element requires the entity to further include a series ofsupplementary disclosures, which allow users to better assess the emissions profile of the entity and judge
the accuracy and reliability of reported emissions data (including the entity’s reliance on estimated vs.
reported data).

In addition to the above, disclosures under this Sub-Element may include:• weighted average carbon intensity;• financed emissions by asset class; and• gross global Scope 1 GHG emissions covered under emissions-limiting regulation (e.g., an emissions
trading schemes).

Targets: Under this Sub-Element, the entity should disclose on what emissions reduction targets it has set,
including a series of supplementary disclosures which are intended to allow users to better assess thecredibility and ambition of these targets. Importantly, this Sub-Element asks disclosures of both long-termtargets and any interim targets, understood as pre-2030 targets (see 1. Foundations).
In addition to the above, disclosures under this Sub-Element may include:• Where the entity has conducted an abatement capacity assessment (See Stage 1: Baseline current
position: Decarbonisation levers assessment) , it’s projected abatement capacity (i.e. share ofemissions projected to be currently economic to abate, share of emissions likely economic toabatement over the long-term and share of emissions likely to remain uneconomic to abate).
The TPT recognises that entities may currently face challenges in reporting accurate and reliable Scope
3 emissions data. If the entity excludes categories of Scope 3 emissions from its metrics and targets, it

should state the reason for omitting them (e.g., due to challenges of data availability or because theseemissions are not material) and, where relevant, outline any actions it is taking to enable target setting forrelevant Scope 3 categories. For guidance on what Scope 3 categories are regarded as relevant, see Stage
1: Baseline current position: Emissions footprinting.

21) Financial institutions may further want to rely on complementary guidance from the Partnership of Carbon Accounting Financials (PCAF) which provides
guidance to assist in the measurement and disclosure of GHG emissions associated with asset classes including listed equities and bonds, commercial realestate, project finance and business loans among others.

TPT Implementation Guidance

Disclosure recommendation

Sub-element46

4.4 Carbon credits
Disclose the intended use of carbon credits which are used by the entity to achieve progress towards theentity’s strategic objectives and priorities, and annually report on the use of carbon credits

Carbon credit targets
Disclose the entity’s intended use of carbon credits in achieving the objectives and priorities outlined

under 1. Foundations. In explaining the intended use of carbon credits, the entity shall disclose information
including:• Why the entity is employing carbon credits and how the use of carbon credits supports achieving theobjectives and priorities outlined under 1. Foundations.

• What third-party verification or certification scheme or schemes the credits are subject to.
• The type of carbon credit, (e.g., whether the credits are generated from carbon removal vs. emissions
avoidance projects, or whether they are based on natural carbon removals vs. technological carbon
removals).

Carbon credit metrics
Entities should annually report on the use of carbon credits used to assess performance against theobjectives and priorities outlined under 1. Foundations. This should include:• The number and cost of credits purchased and retired.
• What third-party verification or certification scheme or schemes the credit was subject to.
• The type of carbon credit (e.g., whether the credits are generated from carbon removal vs emissions

avoidance projects, or whether they are based on natural carbon removals vs. technological carbon
removals).

• Any other significant factors necessary for users to understand the credibility and integrity of carbon

TCFD additionality

credits intended to be used by the entity.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations andguidance by proposing the following disclosure recommendations:• Specifying that an entity should consider disclosing why it is using carbon credits and how this use
supports progress towards targets.

• Specifying that an entity should consider disclosing carbon credits separately from GHG emissions
reduction targets, and specifying supplementary information to allow users to assess the type andInterpretative guidance

quality of the purchased credits.

Under this Sub-Element, the entity’s approach to carbon credits should be consistent with the mitigation

hierarchy, outlined by the Science-based Targets initiative (SBTi), and the VCMI Code of Practice. This implies

that where the entity has placed an emphasis on value chain emissions reduction within its transition plan,
any purchase of carbon credits is regarded as additional and not as a replacement of these efforts. This is

why metrics and targets regarding the use of carbon credits are recommended to be disclosed separatelyfrom metrics and targets used to disclose against Scope 1, 2 and 3 emissions reduction plans.

In addition, the entity should disclose a series of further information regarding carbon credits to allow
external stakeholders to assess the robustness of the purchased carbon credits. This includes:

TPT Implementation Guidance47• The number of credits purchased and retired. We recommend that the entity specifies both the dateof purchase and date of use, separately.

• Information about any third party verification or certification that the credits are subject to, such as
the Gold Standard or Verra’s Verified Carbon Standard. Entities may further disclose whether theseverification schemes adhere to internationally recognised standards such as those developed by the
Integrity Council for the Voluntary Carbon Market.

• The type of carbon credit, including whether it was nature-based (e.g., via mangrove restoration

projects), or based on technological carbon removals (e.g., direct air capture), and whether it was
generated through carbon removal or emissions reduction.

• Other significant factors necessary for users to understand the credibility and integrity of offsets. Herethe entity may consider setting out:		 o Information to identify the project, including the project name, project identifier, carbon crediting
program and issuing registry, credit vintage, carbon credit price, host country, project location,
project type and methodology.

		 o Whether or not the carbon credit is associated with corresponding adjustments by the host,buyer or third-party country, and any host country policy on corresponding adjustments,
including specific reference to proof of retirement.

		 o Whether and how the project contributes to the sustainable development of the host country.
For example, by supporting national or international adaptation by setting aside a share ofproceeds to support adaptation, or investing into beyond-baseline environmental and social
impacts associated with the project.

		 o Proof that the principle of Free, Prior and Informed Consent (FPIC) and Do No Harm wererespected with local communities where the project is situated; and, where appropriate,

proof that projects respect, and ideally enhance, the rights of Indigenous Peoples and Local
Communities (IPLCs).

		 o Information on how the proceeds of a project from which carbon credits have been generated
have been shared with the host community.

		 o Assumptions regarding the permanence of the carbon credit.

TPT Implementation Guidance48

Disclosure recommendation

Sub-element

5. Governance
5.1 Board oversight and reportingDescribe the entity’s arrangements for Board-level governance of the transition plan, including its processes

for Board-level review and approval of the transition plan, and for the oversight of monitoring and reporting of
progress against the entity’s stated objectives and priorities.

Describe the entity’s arrangements for Board-level review and approval of the transition plan, and for theoversight of monitoring and reporting of progress against it. This should include:• A description of the entity’s arrangements and processes for the Board’s approval of the transition plan.
• W hether and how the arrangements are reflected in the entity’s terms of reference, board mandates
and other related policies.

• Whether and how the targets are reviewed by the Board and/or a Board sub-committee.
• Whether and how frequently the transition plan is reviewed by the Board and/or a Board sub-committee.
• W hether and how frequently the Board will monitor and receive reports on progress against the plan’s
objectives and priorities.

• A description of how the Board considers transition plan Elements in wider strategy, risk management

TCFD additionalityand decision making on resource allocation.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations andguidance by proposing the following disclosure recommendations:• Specifying that an entity should disclose the roles and responsibility of the Board and its sub-committees with regards to the transition plan and whether and how these are reflected in the termsof reference, mandates and similar policies.

• Specifying that an entity should disclose both the frequency with which the Board receives reports
and reviews the transition plan, and the process by which the Board reviews progress against thetargets and the plan.

• Specifying that an entity should consider disclosing how the Board links transition plan Elements with

Interpretative guidancewider strategy, risk management, and decision making on resource allocation.

Under this Sub-Element, the entity should describe the governance structures it has in place to ensureaccountability for progress against the objectives and priorities outlined under 1. Foundations. To this end, theentity should describe the arrangements for Board-level governance and oversight of its transition plan. This
disclosure recommendation covers the following four related but distinct questions which may help users tounderstand the role of the Board in the entity’s transition planning journey.

• T he role that the Board plays in the approval of the transition plan. This may include outlining whether a

specific Board Member or sub-committee has been appointed to be accountable for the transition plan.

• Information on the frequency with which the Board (or relevant Board sub-committee) will review the plan.
• T he way the Board monitors and oversees progress against the objectives and priorities outlined under
1. Foundations. Here, the entity may consider including information about the process and frequency

by which the Board (or relevant Board sub-committee) is informed about the progress of the plan (e.g.,internal reporting processes).

• Information about how the transition plan is considered by the Board (or relevant Board sub-committee)
in other decision-making processes. For example, the entity may include a discussion of whether andhow the Board considers the transition plan when reviewing and guiding business strategy, major plansof action, budgets or when defining performance objectives.

In instances where the transition plan underlies identical governance practices as other business functions or

areas, the entity should not disclose the relevant information separately from disclosures of general governancepractices, provided that the entity clearly specifies that these also cover delivery of the transition plan.

TPT Implementation Guidance

Disclosure recommendation

Sub-element49

5.2 Roles, responsibility and accountability
Describe senior management roles and responsibilities for the execution of the transition plan, as well as theentity’s wider control, review and accountability mechanisms.

Describe senior management’s roles and responsibilities for the execution of the transition plan, as well as
the entity’s wider control, review and accountability mechanisms. This should include:• The identity of the body or individuals within a body responsible for oversight and delivery of thetransition plan, including the setting and review of targets and monitoring of progress towards
them.

• Whether the transition plan is subject to shareholder approval.
• How relevant corporate procedures, systems and decision-making processes have been amended
to support delivery of the plan.

• An overview of which aspects of the transition plan are subject to external assurance, including the

TCFD additionality

nature of the assurance.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations andguidance by proposing the following disclosure recommendations:• Specifying that an entity discloses who has oversight and delivery of the transition plan, including thesetting of targets and monitoring of progress towards them.

• Specifying that an entity discloses whether the transition plan is subject to shareholder approval.
• Specifying that an entity should describe how relevant corporate procedures, systems and decisionmaking processes have been amended to support delivery of the plan.

• Suggesting that an entity discloses what aspects of the plan are subject to external assurance, andInterpretative guidance

the nature of the assurance obtained.

Under this Sub-Element, the entity should describe the roles and responsibilities of management in executing
the transition plan, and the internal accountability mechanisms that support the plan. This may include:• How the responsibilities for design, development and delivery of the transition plan or its Elements areintegrated into the role descriptions and responsibilities of senior management and other relevant
staff,and included in their annual objectives.
• Whether members of the senior management team have been appointed to be accountable for thetransition plan or parts of the transition plan.

• How often those members of the senior management team are informed about progress andupdates regarding the transition plan.

• Descriptions of how relevant individuals across teams and functions, who have accountability for the

execution of the transition plan, are being brought together to promote cross-company ownership of
the transition plan and embed a consistent approach across the entity.

• How senior executives and other senior managers are informed about transition plan performanceindicators, as well as delivery risks and how they are being mitigated or managed.

• Relevant escalation processes that are in place to enable any challenges or concerns in relation to

the entity’s transition to be communicated to and considered by senior management and the board
as appropriate.

• Information on internal controls that are in place to scrutinise the transition plan, and progress against
the plan, by relevant internal assurance functions such as internal audit.

• Whether transition plan disclosures are subject to external assurance or audit. The nature of theassurance and the subject matter that is audited or assured should be clear.

TPT Implementation Guidance50• W hether the transition plan is scrutinised by shareholders, such as through an advisory vote at theentity’s Annual General Meeting.

In instances where the transition plan underlies identical governance practices as other business functions
or areas, the entity should not disclose the relevant information separately from disclosures of general
governance practices, provided that the entity clearly specifies that these also cover delivery of the

5.3 CultureDescribe the steps that the entity has put in place to build a culture aligned with the strategic ambition inits transition plan, including through leadership and training programmes, HR policies and procedures andDisclosure recommendation

Describe any steps that the entity is taking to build a culture that supports the successful implementation

TCFD additionality

wider workforce engagement.

All aspects of this Sub-Element of the TPT Disclosure Framework provide further granularity beyond the TCFD

Interpretative guidanceSub-elementtransition plan.

Under this Sub-Element, the entity should consider outlining what policies or programmes are currently inof the transition plan. This may include:• Information on actions to review systems, processes, communications, HR policies and procedures(including compensation and benefits), company values, leadership and manager training

programmes and workforce engagement strategies to ensure the culture supports the behaviours
and ways of working needed for the transition.

recommendations and guidance on transition plans.

place or planned which promote a whole-organisation culture that is aligned with strategic ambitions andobjectives, priorities and interim goals as outlined in 1. Foundations and any interdependencies with theentity’s workforce as outlined in Sub-Element 1.2 Business implications.

It is critical that the entity’s culture and the people strategy support the climate strategy by enabling andrewarding the required behaviours and new ways of working, and by inspiring and meaningfully engaging
the workforce and prospective employees in order to retain and attract the required talent and skills.
The actions described under this Sub-Element should be those that promote a climate-aware andtransition-aligned way of working and culture throughout the entity’s entire workforce, such as:• Identification of key employees – this could include leadership- and management-level staff, working
structures that are key enablers of cultural shifts and promoters of climate awareness within thebusiness.

TPT Implementation Guidance51• Outline of what programmes are planned or in place – this could include Board-level, senior
management and non-senior engagement or training programmes, and HR policies, which

promote a transition-aligned culture, behaviours, and, ways of working needed for the transition.
• Core values that the entity has which are aligned to and support the implementation of thetransition plan.

• A summary of incentives or benefits that employees of all levels receive for working in a waythat promotes behaviours necessary for the transition (as outlined under 5.4 Incentives andremuneration).

Sub-element

5.4 Incentives and remuneration

Disclosure recommendation

Describe whether and how remuneration and incentives for employees are aligned to the objectives and

TCFD additionality• Description of how the entity is listening to and engaging its workforce on the transition plan.

The TPT Disclosure Framework recommends further detail beyond the TCFD recommendations and guidanceDescribe whether and how the entity has put in place arrangements to align remuneration andincentive structures with the stated objectives and priorities in its transition plan.

priorities outlined under 1. Foundations. This should include:• A description of how transition plan-related considerations are factored into executive remuneration,
including:		 o the percentage of executive management remuneration that is linked to transition-plan related
considerations; and		 o key transition plan-related performance indicators used.

by proposing the following disclosure recommendations:• Specifying that an entity should disclose whether incentives and remuneration are aligned withperformance indicators related to the plan.

• If incentives are aligned, specifying that an entity provides a description of how transition plan-related
considerations are factored in, including the percentage of executive remuneration that is linked toInterpretative guidance

transition plan-related considerations and the performance indicators used.

Under this Sub-Element, the entity should describe how incentives and remuneration for senior

management and employees are aligned to the objectives, priorities and interim goals outlined under 1.
Foundations.

The merits of linking executive remuneration with climate objectives are well established, in terms oforganisation’s desired behaviours, setting the tone from the top, providing a ‘north star’ for incentive plan
participants, and as a governance tool to signal management’s support of the plan to employees andexternal stakeholders.

TPT Implementation Guidance

52

The entity may consider setting out:• Whether and how performance-related pay for the executive level is aligned to climate transition
objectives, including:		 o the metric(s) used to calibrate pay;		 o the incentive vehicle in which the metric(s) exists (e.g., annual bonus and/or long-term
incentive plan); and		 o the typical weighting of transition metric(s) in the plan(s).
• Whether and how performance-related pay of employees below the executive level is aligned toclimate transition objectives. In doing this, the entity should consider describing:		 o the metric(s) used to calibrate pay;		 o the proportion or number of employees (including executives) whose performance-related
pay is aligned with the metric(s);		 o the incentive vehicle in which the metric(s) exists (e.g., annual bonus and/or long-term
incentive plan); and		 o the typical weighting of transition metric(s) in the plan(s).

5.5 Skills, competencies and trainingDescribe how the entity ensures that it has the appropriate skills, competencies and knowledge across theDisclosure recommendation

organisation to effectively design, develop and deliver the transition plan.

Describe how the entity will ensure that it has the appropriate skills, competencies and knowledge across

TCFD additionality

Sub-element• Whether and how HR policies and benefits are aligned to the climate transition objectives.

All aspects of this Sub-Element of the TPT Disclosure Framework provide further granularity beyond thethe organisation to successfully deliver its transition plan. This should include how the entity ensures that
relevant board members are involved, and that the board and executive management have or haveaccess to appropriate skills, competencies and knowledge required to provide for effective oversight of thetransition plan.

TCFD’s recommendations and guidance on transition plans.

TPT Implementation GuidanceInterpretative guidance

53

Under this Sub-Element the entity should demonstrate that it has taken the necessary steps tounderstand what skills and knowledge it needs in the organisation to be able to successfully implement
the transition plan. This may include:• Disclosing on steps the entity has taken to identify future skills and knowledge needs.
• Summarising actions the entity is taking to fill knowledge and skills gaps (e.g., company-wideawareness raising and communications, targeted training and re/upskilling for specific workforce
groups, re-organising roles and talent development programmes).

In addition, the entity should describe how it has ensured that its Board and senior management

members who are responsible for the transition plan have, or have access to, the necessary skills,
competencies and knowledge required to provide effective oversight of the transition plan.

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TPT Implementation Guidance

CHAPTER 3 – HOW TRANSITION PLANS ARE USED
Like many entity publications, there are a wide range of possibleuser groups who may make use of an entity’s transition plan. Whendeveloping the Disclosure Framework, the TPT engaged with a rangeof organisations to understand how they use entity transition plans to
inform their own decision-making.
The following section provides an overview of some of the most common users and use-cases (assummarised in Table 2). It is intended to inform entities preparing transition plans about the likely
audiences of their disclosures and their respective informational needs.

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USER GROUPS &SUMMARY OF KEY FOCUS AREAS &Managing thetransition internallyAll preparing entities.

• S upporting the integration of climate-related objectives and an entity’s

management teams and• C ommunicating transition objectives and priorities and resulting changes toInvesting andstewardship

Table 2: Overview of Key Users and Use Cases

USE

Including asset owners,

CASE

ENTITY TYPES

Predominantly

Board of Directors

INFORMATION NEEDS

broader strategy.

an entity’s business model to employees.

• S upporting the implementation and operationalisation of the plan across thereporting entity.

asset managers, private
equity, banks, insurers• Assessing investee entities’ transition paths to inform engagement andinvestment decisions, and to align with their own climate objectives andtransition plans.

• Supporting investors’ efforts to reduce the carbon intensity of portfolios over timeand exposure to assets with high climate transition and/or physical risk.

• Supporting/engaging in investment in transition-resilient entities and providers

Lendingof climate solutions.

Including retail and• Assessing counterparty entities’ transition paths to inform engagement andmultilateral development• Assessing counterparties' credit risk, compliance with covenants with regards

investment banks,

banks, export credit

agencies, development
finance institutions

lending decisions and to align with own climate objectives and transition plans.
to green finance terms.

• Supporting lender’s efforts to reduce the carbon intensity of portfolios overtime and exposure to assets with high climate transition risk over time.

Insurance andreinsurance

Insurers, reinsurers

Assessingvalue chain• Support lending in transition-resilient entities and providers of climate solutions.

Real economy entities and• Assessing insured entities’ transition paths to inform underwriting decisions
and to align with own climate objectives and transition plans.

• Support the economy-wide transition by providing risk-adjusted insurance
cover to climate solutions.

governments• Assessing value chain entities’ transition plans, with a view to managing

carbon emissions in the value chain consistent with (science-based) targets.

• Understanding the remaining corporate carbon budget that is implied by value
chain entities’ net zero targets.

• Tracking value chain entities’ annual progress against carbon reduction
trajectories to inform their Scope 3 emissions profile.

Assessingvalue chain• Supporting/engaging with value chain entities on their transition plans.
Data providers,benchmarking
organisations

As above, while also emphasising standardised sectoral metrics/KPIs, such as:• % of revenue impacted by transitional risks;• location of assets impacted by physical climate risks; andAccountability fromwider society

Regulating andpolicymaking• potential asset impairment due to climate-related risks.
Central banks,

governments, prudential
regulators, industry andAssessment of the quantity and quality of disclosures and impact onmacroprudential supervision compliance.

environmental regulators
Non-governmentalorganisations andconsumers

Alignment of evidence of entities’ progress towards achieving stated climate
ambition.

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3.1 Internal use cases
One critical user of an entity's transition plan is the

preparing entity itself. For example, possible internal
uses include: elping the management team and Board• H

of Directors define how climate targets alignwith the entity’s broader strategy.

 ommunicating transition objectives,• C

priorities and resulting changes to the entity’sbusiness model to employees.

• E mbedding climate change into the entity's
culture and providing transparency toemployees on action being taken.

 upporting the operationalisation of• S

implementation and engagement strategies.

3.2.1 Investing and stewardship
Investors have an important role to play incontributing to an early and orderly whole-of-

economy transition, e.g., by providing finance tothe development of climate solutions, funding theaccelerated phase-out of carbon-intensive assets
or redirecting capital towards entities that arealigned or aligning with the transition. Transition

plan disclosures are critical to allowing investors toplay that role. Most importantly, they enable capitalproviders to (i) better understand and manage theirclimate risk exposure and accelerate opportunities,(ii) align their financing with the objectives andpriorities of their own transition plans, and (iii) more
effectively engage in stewardship.

 roviding a tool to manage and monitor• P

progress against an entity's climate-related
objectives and targets, integrating existing
internal financial and non-financial data
sources.

 trengthening decision making by creating• S
related key performance indicators (KPIs).

 reating accountability by (i) transparently• C

INFOBOX 3:

Investor commitments
Investors are increasingly stepping up efforts toalign their investment activities with the goals of
the Paris Agreement. Key initiatives include:• The UN-convened Net Zero Asset Owner
Alliance (NZAOA), a global coalition ofdelegating responsibility for the delivery of

institutional investors which jointly represent

employees across the entity and (ii) providing

committed to transitioning their investment

key short and medium-term actions to key

USD 6.6 trillion in assets which haveregular progress assessments against shortportfolio to net zero GHG emissions by 2050

and medium-term objectives and priorities at
an operational level.

• A ligning incentives by creating renumeration
structures based on KPIs linked to thetransition plan.

consistent with a maximum temperaturerise of 1.5ºC above pre-industrial levels.

• The Net Zero Asset Managers initiative(NZAM), a global group of asset managers
which jointly represent USD 61.3 trillion

assets under management, which havecommitted to transitioning their portfolios to

3.2 External use cases

net zero GHG emissions by 2050 consistentIn addition to the internal audience, there

above pre-industrial levels.

are a variety of external users that may draw
on transition plans for different purposes. As
outlined in this section, different groups ofexternal stakeholders may require varying levelsof granularity against the Elements and SubElements of the Framework. In some cases,

preparers may wish to tailor their disclosures

to focus on the informational needs of specificexternal stakeholders.

with a maximum temperature rise of 1.5ºC• The Paris Aligned Investment Initiative(PAII), a global forum of asset owners whichseeks to drive investing commitments

and support investors in implementing
commitments.

Transition plan disclosures play a key role inallowing investors to achieve these commitments.

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TPT Implementation GuidanceFirst, transition plan disclosures equip investors

Finally, transition plan disclosures enable better

provide crucial information about an entity’s

an effective transition. Through stewardshipto make more informed financing decisions. They
climate ambitions, its strategy for navigating

the uncertainties of the transition, as well as thecredibility of the action plans and accountability
structures which underpin these ambitions.

For example, a qualitative description of how atransition plan will impact the overall businessmodel of a reporting entity is a crucial piece of

information for investors, seeking to understandthe ability of an entity to navigate the uncertaintyof the transition. Similarly, reported data regarding
Scope 1, 2 and 3 emissions, planned and actual

green capital expenditure and investment in lowcarbon R&D are examples of useful data points

that allow capital providers to assess whether anentity is taking meaningful steps to achieve its

climate pledges. Taken together, transition plans

therefore allow capital providers to better assess

investor stewardship, a crucial tool for supporting
activities such as corporate engagement, filing andvoting on shareholder proposals, voting on board
composition etc., asset owners and managers

seek to engage with and influence management
to ensure an entity takes a strategic approach toclimate issues. Disclosure of transition plans byinvestee entities will allow investors to assess whichof their portfolio entities have less mature transition
plans, and to prioritise engagement efforts

accordingly. In addition, transition plan disclosure
creates transparency around an entity’s progressagainst its strategic objectives and priorities. This

allows investors to better exercise their shareholder
voting rights — including votes on directors andadvisory ‘Say on Climate’ votes – to hold boards
and management accountable.

the potential risks and opportunities of holding

certain assets in their investment portfolio, as wellas improve their understanding of their exposure toclimate-related risks. This improves their ability tomake sound decisions.

Secondly, transition plan disclosures are importantfor investors seeking to develop their own transition
plans and assess progress towards their statedobjectives. For example, investors may, as part oftheir own strategy for contributing to and preparing
for the transition, seek to finance the managed
phase-out of carbon-energy intensive assets.

Transition plans can be an important tool thatallows them to prioritise investments in entities

that have the most credible phase-out plans andmonitor annual progress against these plans.

Similarly, data from investee entities about their

Scope 1, 2, and 3 emissions are important inputs forinvestors seeking to measure their own emissions
footprint and intensity, current transition profileand net zero alignment status. Transition plan

disclosures along the investment intermediation
chain can also encourage mutually supportive

action towards net zero between asset owners andtheir delegated asset managers. For instance, suchdisclosures can encourage proactive engagement
and support the design and implementation of

institutional investment mandates that align withboth parties’ net zero ambition.

Transition plan disclosuresequip investors
to make more informed
financing decisions. They
provide crucial information
about an entity’s climate
ambitions, its strategy for
navigating
the uncertainties of thetransition, as well as thecredibility of the actionplans and accountability
structures which underpin
these ambitions.

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INFOBOX 4:

Relevant resources on investors’ data needs
To ensure decision-useful transition plan disclosures, an entity should seek to understand what types ofdata are relevant to the different providers of financial capital. In doing so, it could consider the emerging
relevant standards, methodologies, and frameworks. The following is a summary of some illustrative
examples of such emerging guidance on the data needs of capital providers:• GFANZ has published a report on Expectations for Real-economy Transition Plans for consultation.

This document provides granular guidance regarding the information that financial institutions findrelevant, when assessing transition plans.

• The Institutional Investors Group for Climate Change (IIGCC) is a coalition of investors which aims
to support and enable investors in driving progress towards net zero and a resilient future. Besides

publishing guidance targeted at investors (see e.g., the Net Zero Investment Framework (NZIF)), theycollaborate with other initiatives such as the Transition Pathway Initiative (TPI) to develop guidance andinvestor expectations for entities across a range of specific sectors (see e.g., Net Zero Standards for Oiland Gas, Accelerating the transition in the trucks sector and its value chain).

• Climate Action 100+ is an international investor network engaging with entities on catalysing climate
action. They published a Net Zero Company Benchmark which is used to assess the performance ofentities against the initiative’s goals.

• The Transition Pathway Initiative (TPI) is a global initiative which gives investors open access toassessments of entities’ preparedness for transition. In addition, they have prepared a series ofreports, methodological notes and guidance documents which can help entities across different
sectors understand what information capital providers are likely interested in.

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3.2.2 Lending
Similar to investors, banks and other lenders can
support the transition to a net zero economy

through their lending and financing decisions
and by enabling the transition of their clients.

Like investors, lenders will look to transition plans
to better understand their exposure risks at theportfolio level, in particular an entity’s credit risks,
for which exposure is driven by climate-related,

operational, market, legal and reputational risks.
INFOBOX 5:

Lender commitmments

In addition, transition plans can provide key

inputs for developing sustainability-linked lending
products to ensure i) the use of proceeds, or ii)

that borrowers’ strategies are aligned with andcontribute to a low-carbon future. For example,
lenders are increasingly looking to link the costof capital to transition-related indicators suchas decarbonisation performance. Transition

plans can inform and provide the data for suchsustainability-linked financing arrangements,

thereby allowing lenders to provide a financial
incentive that encourages borrowers todeliver on their plan. Lenders will therefore beparticularly interested in the targets defined in

Similar to asset owners and asset managers,a transition plan, as well as annual reporting of

the global transition to net zero. A key alliance inmeasurement of progress.

lenders are increasingly signing up to supporting
this space is the Net Zero Banking Alliance (NZBA),
which represents nearly 40% of global banking

assets. Participating institutions have committed

to aligning their lending and investment portfolios
with net zero emissions by 2050.

Members further agreed to use the Guidelines for

Climate Target Setting for Banks, which are basedon the following principles:• Decarbonisation goals that support thetransition to a net zero economy by 2050,
with intermediate targets defined every
five years.

• The banks' goals must include the yearlyreport of Scope 1, 2, and 3 emissions fromtheir clients.

• The targets shall focus on achieving an
impact on the real economy.

key performance indicators that allow for the

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3.2.3 Insuring

3.2.4 Assessing value chain

Insurers can support the transition to a net-zero

Real economy entities and governments looking

Transition plan disclosures are useful for insurers

the climate resilience of their supply chains are

economy through their underwriting decisions.

as they allow them to better understand an entity’s
exposure to climate-related risk.

For example, understanding an entity’s planned
climate solutions, research and development

activities and asset phase-out in the short-term,
will be key information which allows insurers toassess the risk profile of a client. Similarly, insurers

to reduce their Scope 3 emissions or ensure

another key user of corporate transition plans. Key
uses include (i) assessing the exposure of theirown supply chain to climate-related risk, and (ii)assessing whether suppliers and value chain(s) arealigned with their own transition plan objectives,

thereby informing targeted actions to reduce their
Scope 3 emissions.

are likely to be interested in the robustness of theFirstly, real economy entities typically use data

whether the transition plan is sufficiently resilient

plans to inform their own commercial decisions

sensitivity analyses underlying the plan, including
to the physical impacts of a changing climate. This

information allows insurers to provide risk-adjusted
insurance cover to support innovation and enable
low-carbon assets and climate solutions to enter
the market.

INFOBOX 7:

Insurer commitments

disclosed within supplier or customer transition

about how to mitigate climate-related risks. For

example, transition plans can help entities assess

whether their suppliers or customers are exposed
to high physical risks (e.g., due to the location of

their production facility), and understand whether

they have credible action plans in place to mitigate
those risks. Similarly, they may look to transition
plans to understand possible reputational andlitigation risk that may arise from working with

Insurer Commitments

particular suppliers.

Insurers play a unique role in the transition as

Secondly, real economy entities may look toconvened Net-Zero Insurance Alliance (NZIA)

chain to inform the development of their own

risk managers and enablers of assets. The UNbrings together over 29 internationally leading

insurers which have committed to transitioning
all operational and attributable greenhousegas (GHG) emissions (Scope 1, 2, and 3) fromtheir insurance and reinsurance underwriting
portfolios to net zero by 2050. The NZIA also

considers integrating entity-specific net zeroand decarbonisation-related risk criteria into risk
management frameworks.

transition plans of entities within their supplytransition plans. Transition plan disclosures are

crucial to allow an entity to understand the Scope
3 emissions associated with their operations,and understand the degrees to which different
segments of their value chain are aligned with
their own ambition. They are therefore likely to

be interested in information on GHG emissions,

whether these have been verified by third-parties,

as well as how targets and current GHG emissions
compare to industry peers. This information canthen be used to define objectives and priorities

for Scope 3 emissions reductions and value chain
engagement efforts.

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3.2.5 Data analysis

3.2.6 Regulating and policymaking

Comparing transition plans and identifying

Central banks and prudential regulators have theimportant component among financial market

appropriately managing its exposure to climate-leading and lagging practices is becoming an

participants to make investment decisions. Data
analytics providers are playing an increasingrole in assessing the progress of portfolio entities
against their transition plans, including throughmodelling Implied Temperature Rise (ITR) metrics.

Data analytics providers can also assess the level ofambition between entities and analyse the viabilityof meeting their own targets.

Data analytics providers are particularly interested
in quantitative data in a tabulated format that canbe used as a key input into data analytic models,

responsibility to ensure that the financial system isrelated risks. This involves both microprudential
supervision, which ensures that individual

entities are appropriately managing risks, andmacroprudential supervision, which aims to ensurethat the financial system is resilient to climate-

related risks. Transition plans play an important rolein providing forward-looking information which will
enable timely allocation of capital to finance thetransition as well as to identify, measure and, where
necessary, mitigate the potential climate-relatedrisks.

as well as information regarding the methodology

Securities and conduct regulators have a

Additionally, assumptions such as carbon savings

integrity and investor and consumer protection.

behind the target setting or alignment metric.
from changes in products or services, growth

assumptions, and any plans to invest or develop
low-carbon products can act as an importantforward-looking signal for investors.

A number of different users, including

policymakers/regulators, are expected touse transition plan data in aggregated form.

Aggregation will also require consistent data

formatting and metrics. Preparers should consider
presentation and granularity of data, as well as
digital tagging requirements, when disclosing

quantitative data to enable data to be accuratelyreflected in data models and provide a holistic

picture of the current and future emissions intensityof a sector or portfolio.

responsibility to preserve and enhance market

Strengthening disclosure of high-quality transition
plans will better inform asset pricing, leading tomore accurate valuation of issuers’ securities. Withbetter information, financial services firms canmake more informed capital allocation decisions

and develop products that better meet client andconsumer preferences. Ultimately, clients andconsumers can then assess which providers meettheir needs and hold them to account. Regulatorsthemselves can also use transition plan disclosures
to assess the extent to which listed entities andregulated firms are able to evidence credible,

actionable plans aligned with their public net zeroclaims. To this end, regulators, such as the FCA,

have already set regulatory expectations regardingtransition plan disclosures, directly referencing thetransition plan-related guidance published by the
TCFD.

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Policymakers use forward-looking plans to assess

credentials, often going beyond carbon emissions

capital investment across the private sector isas product offerings or the circular economy. Suchthe objectives, proposed activities and related

sufficient. One example of these forward-looking

plans are the Climate Change Adaptation reporting
requirements, which entities are invited to reporton periodically, under the UK’s 2008 Climate

Change Act. These reports can serve two purposes:(i) help engage Boards to actively consider theadaptation requirements of their entity and ensure
they are responding strategically, and (ii) inform
policymaking across the economy.

3.2.7 Accountability to wider society
Beyond regulators and shareholders, civil society

organisations (CSOs) use transition plans to drive

accountability across the private and public sector
on climate action. CSOs environmental interests

can cover a range of mission-driven organisations,
including grassroot campaigners and activists,charities, think tanks, industry bodies and alliances.
Separately, individual citizens are empowered

to hold entities to account on their sustainability

and focussing on wider environmental issues suchconditions can lead to a change in consumer

preferences that may become financially material
for corporations.

Societal stakeholders will look to transition plans
to understand how an entity seeks to contributeto a global transition to a low-carbon economy.
At the more granular level, CSOs are likely to beinterested in similar data points as investors andother stakeholders. For example, they might use
transition plans to evaluate progress against

short-term targets, assess the levels of funding

made available for the development of low-carbon
solutions and understand an entity’s plans todevelop new products and services. CSOs may

further be particularly interested in the extent towhich an entity considers the social implications of
its transition, including the impact on its workforce,
customers and other communities, and how anentity engages with public sector bodies on policy
initiatives.

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TPT Implementation Guidance

CONTACT US
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