Only 5% of the UK’s largest public companies published climate transition plans that were “credible” or sufficient detail under draft British government guidance. This despite most businesses claiming they are committed to reducing their greenhouse gas emissions.
The UK government announced last week that it will consult on making transition plans. This is where companies describe how they intend to reduce emissions and the costs associated with doing so. It is mandatory for all large companies including private companies. Failure to comply with this requirement will require companies to justify their actions.
EY’s new research found that despite 80% of FTSE 100 companies already having disclosed plans that include public targets to achieve net-zero emissions by 2050, only 5% would adhere to the Transition Plan Taskforce’s draft disclosure framework. After the British government made a commitment at the UN COP26 climate summit in Glasgow, that UK-listed businesses would publish decarbonization plans by 2023, the TPT was created last year.
Rob Doepel is EY UK and Ireland’s managing partner for sustainability. He said that the research revealed the immense amount of work required by British companies to achieve the “gold standard”, as required under the TPT framework.
He said, “We have many organisations that have made great promises and stated of intent and talked about great project ideas, but there aren’t many that have fully aligned and exhaustive plans that get them to where they need to go.”
Investors, regulators, and governments around the globe are becoming more focused on the necessity of corporate transition plans. They are essential tools to understand how companies will react to the transition to a low carbon economy. The Paris Agreement enjoins countries around the globe to keep global temperatures from rising to 2C and 1.5C above preindustrial levels. This will require massive overhauls of global economies that have been dependent on fossil fuels.
Doepel stated that investors desired companies to detail how their finances would change by the shift towards net zero. This would allow them to compare how well-prepared different businesses are. Many companies were concerned that the public disclosure of this information could impact their capital access.
EY also found that companies were the weakest in meeting the TPT framework implementation requirement. This requires companies to reveal how they plan to change their business plans and operations, as well as products and services.
Doepel stated that the COP26 goal for companies to publish mandatory plans of transition in 2023 would be likely missed but added that “2024 is realistic” following the fall consultation.
He said that companies had no reason to be unprepared, given the existing draft framework. He said that businesses should continue to develop detailed and actionable plans to enable them to transition.
An international campaign, initiatedby billionaire investor Chris Hohn has called for shareholders to vote in a company’s transition plan, also known as a ” voice on climate”.
Michael Hugman, the director of climate finance at The Children’s Investment Fund Foundation was co-founded with Hohn. He stated: “Without credible and short-term plans for transition, we can’t meet our climate goals, or raise the capital needed to drive green jobs and growth.”
Sofia Bartholdy was the net zero lead for Church Commissioners of England. This fund is the endowment fund of Anglican Church. She said that it was disappointing that so many companies weren’t publishing sufficient plans.
“Even though climate experts continue to warn of the urgent need for climate action, we are still seeing a disappointing response by companies whose actions could help address this crisis. She urged those who have not yet published their transition plans to do so as soon as possible.
The Local Authority Pension Fund Forum (a group of 86 UK public sector pension funds, asset manager CCLA and Sarasin & Partners) wrote to FTSE 100 companies in February asking for climate votes.
“We believe that there should be disclosure about robust transition plans, as well as governance and accountability mechanisms that support them delivery,” Tessa Younger, CCLA’s ‘better environmental’ lead, stated at the time.