TPT Consultation launched for Sector Deep Dives

The UK Transition Plan Taskforce (TPT) has published various consultation papers on proposed guidances for transition plans of asset managers, asset owners, banks, and various other non-financial market segments such as energy, food, metals, and oil. The guidances come in response to the UK’s commitment to achieve net-zero greenhouse gas emissions by 2050 and the subsequent creation of the TPT to support the transition to net-zero emissions by that time.
The TPT’s main goal is to establish a high-quality standard for private sector climate transition plans, ensuring consistency and credibility and alignment with global standards like the Glasgow Financial Alliance for Net Zero. The Framework outlines a four-step process for creating a transition plan and recommends that these plans be published as standalone documents alongside financial reports. The plans should thereby cover four essential elements:
– the overarching goals of firms to tackle climate change,
– detailed strategies for the short, medium, and long term including financial aspects for the transition,
– robust governance and reporting systems to monitor achievements and ensure accountability for (non)achievement, and
– strategies to manage risks and capitalize on opportunities for nature and stakeholders.
Before deep diving into any one guidance, the TPT suggests affected firms and persons to read the TPT’s general disclosure framework which offers general recommendations for disclosing a company’s climate ambitions, implementation strategies, governance and accountability framework, and financial impacts related to its transition plans – irrespective a firm’s operating sector.
(1) Asset Manager Transition Plan Guidance: This guidance is specifically addressed at asset managers, whether they be stand-alone entities or firms within a larger group. While the TPT recommends asset managers‘ transition plans to consider the entire operations of such firms – including their own internal operations, this particular guidance focuses on the investment business; the remaining business is NOT unique to this sector and is thus covered in the general framework.
In this context, the guidance recommends that transition plans include all asset classes managed or dealt with by asset managers, even when there is insufficient information available on one asset or the other. Such lack of information should be adequately disclosed in the plans along with a firm’s plans to mitigate this information shortage. Furthermore, the guidance highlights the synergy between asset managers and asset owners, underlining dependencies e.g. with respect to investment strategies to foster the transition toward a low-GHG and climate-resilient economy. Therefore, climate considerations should be incorporated in contractual agreements between asset owners and asset managers.
The guidance finally provides various aspects that should be essential parts of a transition plan of asset managers and offers recommendations on each one of these aspects. Such essential parts include, but are not limited to the following:
– an asset managers strategic ambitions with respect to transitioning to net-zero carbon emissions;
– business products and services offered;
– engagements with other stakeholders within the value chain to foster the transition;
– governance policies to support the transition;
– specific targets within the short-, medium-, and longterm; and
– metrics used to measure the performance of asset managers as it relates to these targets.
(2) Asset Owner Transition Plan Guidance: This guidance is addressed at diverse entities and groups, including „public- and private-sector pension plans, re-/insurance companies, sovereign wealth funds, endowments, foundations, and family offices“ which invest assets on behalf of their customers or group members or on their own behalf. Again, while such entities‘ transition plans should consider the entire operations of asset owners, the focus of the guidance is on the investment activities of asset owners. As with the other guidances, this one also covers the key elements to be contained in the transition plans, ranging from strategic policies to transition to net zero carbon emissions, to engagements with stakeholders, including asset managers, to the adoption and disclosure of metrics used to measure asset owners‘ achievements in relation to their set targets.
The guidance also discusses dependencies on asset managers to achieve the net-zero emission target.
(3) Bank Transition Plan Guidance: This guidance is addressed at financial institutions engaged in commercial and retail banking activities. Investment activities are explicitly excluded so far, as they are covered either by the asset manager or the asset owner guidance. The TPT will consider including investment activities of banks in the guidance at a later point in time. With this said, the TPT notes that banks should „address their full range of operations and activities in their transition plans, covering on- and off- balance sheet activities, including (but not limited to) lending, sales and trading, capital markets, and advisory activities“. In view of their key activities – lending, banks are recommended to dedicate a large part of their transition plans to their engagements with borrowers, particularly commercial borrowers, in an effort to reduce carbon emission. Nevertheless, the guidance also covers all other aspects that should be essential in banks‘ transition plans, including strategic objectives to transition to net-zero carbon emissions, governance policies to support the transition, specific targets within the short-, medium-, and longterm, and metrics used to measure the achievements of such targets, to name a few. As with all other guidances, the bank transition plan guidance contains detailed recommendations on all of these issues.
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The TPT concludes by reminding market participants of its ongoing consultation on a draft sector summary which is open for public comment up to November 24, 2023.
Also, comments on the above noted guidances may be submitted via this website.