Transition Plans Are The Latest Climate Action Trend - The Wall Street Journal

Transition Plans Are The Latest Climate Action Trend - WSJ

Companies have a new climate-action tool: transition plans.

These strategic plans—spelling out how a company expects to revamp its business in the near term to get on track to reach their climate promises—are the latest must-haves for companies, much like the 2021 trend of making a net-zero promise.

Businesses are under increasing pressure from investors, financial institutions, customers and other stakeholders to demonstrate how they plan to reach their long-term decarbonization promises. Some companies, such as Mars and Allianz, have recently published transition plans. More businesses are expected to do so ahead of this year’s United Nations climate summit in Dubai, much like what happened with net-zero promises in the run up to the U.N. climate summit two years ago.

“2023 is the year of the transition plan,” said Mary Schapiro, vice-chair of the Glasgow Financial Alliance for Net Zero and former chair of the U.S. Securities and Exchange Commission.

The U.K.’s Transition Plan Task Force published its framework Monday, offering a template for companies looking to create transition plans. The Task Force sets out best practices for disclosure and provides implementation and sector guidance that aligns with the recently published International Sustainability Standards Board climate standards and builds on GFANZ’s guidance for financial companies published last summer.

The U.K. taskforce’s voluntary guidance looks at what a company’s strategic ambition is, its business model, value chain and central assumptions. It also covers a company’s implementation strategy, engagement strategy and its governance, metrics and targets. Next month the group will also publish for consultation sector-specific guidance in seven industries: Banks, asset owners, asset manager, utilities, food, mining and oil and gas.

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“We’re all in the same position and the framework we have all worked hard to deliver today helps with that: It doesn’t give us the answers, but it does give us a clear and consistent process for trying to work them out,” said Amanda Blanc, co-chair of the Transition Plan Taskforce and CEO of global insurer Aviva Group. “The [transition] plan is vital to progress, it’s your vehicle to tackle those tricky decisions head on, to find a balance and to communicate that to others.”

While over two third of companies in U.K.’s FTSE all-share index have published net-zero targets, less than 20% have detailed transition plans, said David Schwimmer, CEO of the London Stock Exchange Group.

Even though disclosure requirements are currently voluntary, transition plans are a live issue for many businesses that can help them shift the conversation to how they can achieve their net-zero goals. “[There has been] a change from asking, ‘Why do I have to do this?’ to really engaging with the ‘How do we do this? What are the practical approaches to getting this done?,’” said Sue Lloyd, vice-chair of ISSB.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com

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