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1、Climate Transition Planningits Time to DiscloseOctober 2023Contents02|Overview of the UK Transition Plan Taskforce Disclosure Framework06|Five Reasons to Complete TPT Transition Plans08|Five Key Success Factors for a Transition Plan2 CLIMATE TRANSITION PLANNING ITS TIME TO DISCLOSEIn April 2022,the
2、UK launched the Transition Plan Task-force(TPT)to develop the TPT Disclosure Framework for climate transition plans,which was published on 9 October 2023.The Disclosure Framework requires UK businesses to develop transition plans that focus on(i)decarbonisa-tion,(ii)physical and transition risks and
3、 opportunities and(iii)broader contribution to UK decarbonisation and adap-tation,whilst considering nature and social stakeholders.The Financial Conduct Authority(FCA)already requires many large companies,asset owners and asset managers in the UK to make climate-related disclosures,mainly about cli
4、mate-related risks and opportunities.The TPT builds upon these existing disclosure requirements and the FCA has signalled that it will strengthen regulation based on the TPTs outputs in the next few years.The development of a transition plan enables companies to identify the steps they must take to
5、meet their identified climate targets.Mandatory disclosure of the plan helps to inform investors on how to allocate capital based on a companys climate ambition,strategy and exposure to risk,for example.It also serves as a mechanism to hold compa-nies accountable.A global shift towards more stringen
6、t climate-related dis-closures is currently taking place.The EU and other re-gions are also moving towards mandated disclosure of transition plans.The TPT Disclosure Framework aims to become the go-to standard for transition plan disclosures beyond the UK.The Taskforce has collaborated with standard
7、 setters,industry associations and regulators from around the world with a view to converging around an ambitious and effective approach.Dr.Ben Caldecott,TPT Secretariat Co-HeadOverview of the UK Transition Plan Taskforce Disclosure FrameworkBOSTON CONSULTING GROUP|CENTER FOR CLIMATE&SUSTAINABILITY
8、POLICY REGULATION 3Mandatory ReportingPASTNOWFUTUREVoluntary ReportingClimate and SustainabiliyClimate Principles-based guidance on“how”to approach disclosures(e.g.topics/methodology)has been prescriptive but voluntary is being replaced by mandatory reporting directives across the UK,EU and US.Previ
9、ous reporting guidances have been climate-centric,such as TCFD1 and SBTi2 new reporting guidances take a wider scope to include sustainability and nature-related concerns,e.g.TNFD3&SBTN4.Transition PlanningRisk Disclosure Previous guidance has focused on evaluating and disclosing carbon emissions an
10、d climate-related risks and commitments the TPT is the first guidance of its kind to focus on planning and aims to set a best practice for climate transition plans that will be required by UK regulators.The hope is that it will be adopted by other jurisdictions and expanded to include nature.Inclusi
11、on of double materialityExhibit 1-There is a rising tide of climate disclosure requirements,with progress being made along several dimensionsNote:1.Task Force on Climate-Related Financial Disclosures;2.Science Based Targets initiative;3.Taskforce on Nature-related Financial Disclo-sures;4.Science Ba
12、sed Targets Network4 CLIMATE TRANSITION PLANNING ITS TIME TO DISCLOSEGuidance StructureThe TPT Disclosure Framework is composed of five ele-ments.In each section companies set out:1 Foundation:the objectives and priorities of their transition plan,including efforts to safeguard the natu-ral environm
13、ent,avoid adverse social impacts and capture opportunities.2 Implementation Strategy:a roadmap of short-,medium-and long-term actions to change their busi-ness strategy and operations to meet their identified objectives.3 Engagement Strategy:their engagement plans with the value chain,industry,gover
14、nment,public sector communities and civil society,to contribute to an economy-wide transition.4 Metrics and Targets:the metrics and targets of the plan to monitor progress.5 Governance:the governance and organisational processes that ensure oversight,accountability and delivery.In addition to the ov
15、erall Disclosure Framework,the TPT has also produced sector-specific guidance for the following sectors,which will be“bolted on”to the Disclosure Frame-work:1.Food&Beverage2.Asset Manager3.Electric Utilities&Power Generation4.Asset Owner5.Banking6.Metals&Mining7.Oil&GasThese sectors were selected ba
16、sed on their emissions impact,potential to provide climate solutions,investment gaps and quality of existing guidance.Given the UKs ambition to be the worlds first net-zero-aligned financial centre and the potential for financial organisations to unlock economy-wide decarbonisation through capital d
17、eployment,there was also a focus on the financial sector.Finally,alongside the Disclosure Framework,the TPT has also produced the implementation guidance on how com-panies should practically develop and disclose their cli-mate transition plans.The implementation guidance provides practical recommend
18、ations for adopting the Disclosure Framework.For example,if carrying out an assessment to identify the impacts of a transition plan on nature,the implementation guidance would point to the Taskforce on Nature-Related Financial Disclosures(TNFD)framework.The implementation guidance also provides opti
19、onal disclosures for entities looking to go beyond the basic requirements.It is advised that companies publish their transition plan at least every three years,or after significant changes occur.Additionally,the TPT Framework recommends disclosing material1 information about the climate transition p
20、lan,including its progress against the plan,in a companys general-purpose financial reports.For example,a compa-nys annual report.Where the TPT Disclosure Framework Sits Within Existing Climate Disclosure GuidanceThe TPT Disclosure Framework actively aligns with and builds upon other international d
21、isclosure frameworks to contribute to a global consensus.One area of potential misalignment relates to single versus double materiality.Single materiality covers how compa-nies are affected by risks and opportunities arising from interdependencies with nature and social stakeholders.Double materiali
22、ty extends to include the risks and oppor-tunities that companies pose to nature and social stake-holders.The EU is adopting a double materiality standard.The TPT Disclosure Framework is technically limited to single materiality,aligned with International Financial Reporting Standards(IFRS).However,
23、the TPT takes a broad approach which suggests that over a long timeframe,adversely impacting nature and society will affect the business;hence both must be safeguarded and interde-pendencies must be managed.Net zero targets and transition plans must incorpo-rate impacts on nature to avoid unintended
24、 conse-quences that undermine wider environmental goals,and which also have major economic and social implications.The TPT Disclosure Framework takes an important step by explicitly recognising this.Karen Ellis,Chief Economist,WWF-UK1.Any information that,if omitted,misstated,or obscured,could reaso
25、nably be expected to influence decisions that the primary users of general purpose financial reporting make on the basis of that reporting,which provides information about a specific reporting entity IFRS definition of material.BOSTON CONSULTING GROUP|CENTER FOR CLIMATE&SUSTAINABILITY POLICY REGULAT
26、ION 5Exhibit 2-Structure of TPT Disclosure Framework2ImplementationStrategy3EngagementStrategy4Metrics&Targets5GovernanceACTIONACCOUNTABILITYPRINCIPLESGovernance,engagement,business and operational metrics and targets4.1BusinessoperationsProductsand servicesEngagement with value chainEngagement with
27、 industry4.2Financial metrics and targetsPolicies and conditionsFinancial planning5.3Culture5.4Incentives and renumeration5.5Skills,competencies and trainingEngagement with government,public sector communities and civil society4.3GHG metricsand targets4.4Carbon credits5.1Board oversight and reportin
28、g5.2Management roles,responsibilityand accountability1.12.32.42.12.23.33.13.21FoundationAMBITIONStrategicAmbition1.2Business modeland value chain1.3Key assumptionsand external factorsDISCLOSURE ELEMENTSDISCLOSURE SUB-ELEMENTSFive Reasons to Complete TPT Transition PlansAlthough it is unclear when an
29、d how the FCA will make disclosure of climate transition plans mandatory,it makes business sense to align with the Disclosure Framework now for five key reasons:A transition plan is essential for any business that wants to meet its climate objectives.Currently,many targets for emissions reduction ar
30、e not underpinned by sufficient plans2.As companies are called upon to set near-term interim targets,the urgency to develop concrete and actionable plans to achieve these targets grows.A Plan is Needed to Achieve Climate Objectives These plans are non-trivial and often require defining a holistic tr
31、ansformation of the companys strategy,organi-sational structure,business models and culture.Further,the process requires understanding the steps necessary for conducting such a transformation,their financial impacts and what processes must be imple-mented for delivery.The TPT has built upon global g
32、uidance,academia,industry and regulation to help companies understand how to develop a transition plan.Companies should leverage this thinking by using the framework to develop their plans.Following the Framework also requires the whole organ-isation to do this activity simultaneously,which enables
33、coherence between business unit strategies.Companies that mobilise early will be on the front foot when disclosure does become mandatory.TPTs Framework Will Ease the Difficult Planning Process122.Corporate Climate Responsibility Monitor,2023 Disclosing a transition plan enables a business to com-mun
34、icate a coherent and credible transition narrative and provide transparency to stakeholders.In order to understand how entities intend to meet their ambitious climate commitments,investors,NGOs,cus-tomers,regulatory bodies and shareholders are calling for greater visibility on climate transition pla
35、ns.The TPT Framework enables a business to provide this information in one place.When companies cannot meet stakeholder demands,they can use their transition plan to communicate the reasons why and their plan going forward.A Disclosed Transition Plan Provides the Transparency Stakeholders Seek4 The
36、TPT Framework was written with both global and future applicability in mind.It builds upon,and is aligned with,two widely used international standards:Task Force on Climate-Related Financial Disclosures(TCFD)and IFRS.This suggests that it will likely be sufficient for meeting upcoming dis-closure re
37、quirements in many other countries.Furthermore,as TPT requires disclosure on non-UK op-erations of UK groups in scope,it is practical to prepare a TPT-aligned transition plan at the group level,instead of relying on disaggregated reporting from non-UK sub-sidiaries.The TPT framework requires conside
38、ration of Nature,Just Transition,Adaptation and Resilience nature and stakeholders need to be safeguarded,interdependencies with them need to be managed and climate adaptation measures must be part of the plan.While current focus for disclosures is on climate transi-tion plans and emissions reductio
39、n,urgent attention is shifting to these adjacent areas,particularly to nature.Companies that pay attention to these adjacent areas now will be well-positioned for the TPT adoption by the FCA and for the general shift towards holistic transition planning.TPTs Approach Simplifies Navigating Upcoming R
40、equirements The process of writing a transition plan requires a company to perform a stocktake of every transition-re-lated activity,from their strategy to their governance,and assess these activities against what a good practice transition plan requires.This exercise reveals the existing relevant a
41、ctivities and aggregates that information in one centralised place.More critically,it exposes gaps that need to be ad-dressed in the transition plan.For example,regarding data capabilities,internal policies,accountability mech-anisms,leadership capabilities and the consideration of nature and stakeh
42、olders.This process helps to unify the organisation around a single consistent and coherent plan,while preventing duplicated efforts.The Process is a Valuable,Unifying Stocktake358 CLIMATE TRANSITION PLANNING ITS TIME TO DISCLOSE To ensure buy-in from business decision-makers and to inspire the orga
43、nisation,the instruction for and endorse-ment of a transition plan needs to come from the top level of a business.The owner of the plan should communicate the vision,rationale and expectations to the firm.For example,they could commit to supporting the transition and regularly revising the transitio
44、n plan,and to upskilling the organi-sation as needed.They could also set the expectation of adopting a learning-by-doing approach.Explicit CEO endorsement also demonstrates that a company is taking this process seriously and that it is high on the agenda.Position a Senior Exco Member as the Owner On
45、ce companies begin to disclose their transition plans,they will be under public scrutiny.Their plans will likely require a departure from busi-ness-as-usual.It is crucial that plans are not prepared in isolation by the sustainability team,as for plans to be actioned,the backing of the entire busines
46、s will be required.Therefore decision-makers throughout the business need to be involved in setting the objectives,priorities and actions,as well as in executing these actions and monitoring progress.Mobilise the Business as a Whole Delivering the transition plan will require the integration of sust
47、ainability capabilities into job roles and business units.A siloed sustainability team model will not be sufficient.To embed sustainability into decision-making and strate-gic planning,it will need to be hardwired into company culture.Initiating an organisation-wide cultural shift requires a compell
48、ing case for change,the upskilling of leadership to raise awareness and shift mindsets,incentives at all levels to drive desired behaviours and employees to en-gage with and feel ownership of the climate objectives.One element of achieving this will be equipping employ-ees with the necessary knowled
49、ge and skills to contrib-ute effectively to the transition plan.The steps to build such a culture are reflected in the TPT recommended disclosures,e.g.executive management remuneration linked to transition plan-related objectives and workforce engagement and upskilling strategies.Prepare for Organis
50、ational and Cultural Redesign Five Key Success Factors For A Transition PlanBOSTON CONSULTING GROUP|CENTER FOR CLIMATE&SUSTAINABILITY POLICY REGULATION 9 To be credible,the actions in the plan must be speci fic,practical and deliver against interim and long-term targets.Clarity should be provided on
51、 the underlying data and methodologies used to prepare the plan,for example:how organisational and operational boundaries for emissions were set according to the GHG Protocol Corporate Accounting and Reporting Standard3 how the TNFD4 LEAP approach was used to identify interdependencies with nature h
52、ow the principles of Free,Prior and Informed Consent(FPIC)and Do No Harm were respected in Carbon Credit projects.Furthermore,businesses must lay out how the assump-tions underlying their plan(e.g.policy change,techno-logical developments,shifts in consumer demand,the levels of warming)impact their
53、ability to achieve their goals.However,the detail and transparency that underpins a credible plan must be balanced with flexibility,so future changes to reporting requirements can be incorporated.Get Practical to Stay Credible Companies need to develop,quantify,communicate and track the business cas
54、e for the transition.Responding to climate risks and opportunities is central to the TPT approach,but while the risks climate poses to businesses are becoming increasingly clear,the benefits can be more challenging to evaluate.Nevertheless,previous BCG research has demonstrated that investors value
55、sustainability when it is under-pinned by a robust business case,as this has been shown to create company value.As the transition plan is implemented,keeping track of the opportunities to understand how they are generating value for the company will allow for climate strategies to continuously impro
56、ve.This in turn will lead to further business opportunities.This framework reflects how the UK is requiring businesses to help facilitate the transition to a low GHG emissions and climate-resilient economy.Business leaders need to decide how they want to do this and prepare their organi-sations for
57、the shift.The most successful leaders will see this as a strategic opportunity,as opposed to a regulatory burden.Identify the Benefits for the Business3.The Greenhouse Gas Protocol:A Corporate Accounting and Reporting Standard4.Taskforce on Nature-related Financial Disclosures10 CLIMATE TRANSITION P
58、LANNING ITS TIME TO DISCLOSEAbout the Authors Jesper Nielsen is a managing director and senior partner in the firms London office.He leads the Sustainable Fi-nance Investing&Carbon Markets topic for BCG globally.You may contact him by email at .Edmond Rhys Jones is a partner and associate director i
59、n the firms London office.He co-leads BCGs Center for Climate&Sustainability Policy&Regulation.You may contact him by email at .Olga Galin is a principal in the firms London office.She is a core member of BCGs Climate and Sustainability prac-tice area,focussing on energy transition and nature.You ma
60、y contact her by email at .Eriola Beetz is a managing director and partner in the firms London office.She leads BCGs Climate and Sustain-ability Practice for Financial Institutions in the EMESA(Europe,Middle East,South America,Africa)region.You may contact her by email at .Jannik Leiendecker is a pa
61、rtner and associate director in the firms Munich office.He co-leads BCGs Center for Climate&Sustainability Policy&Regulation.You may contact him by email at .Nako Thompson is an associate in the firms London office.You may contact her by email at .Boston Consulting Group partners with leaders in bus
62、iness and society to tackle their most important challenges and capture their greatest opportunities.BCG was the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizat
63、ions to grow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,te
64、chnology and design,and corporate and digital ventures.We work in a uniquely collaborative model across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.For information or permission to reprint,please contact BCG at .To find the latest BCG con-tent and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and Twitter.Boston Consulting Group 2023.All rights reserved.10/23