UK Consultation on Climate Transition Plans
The UK government has launched a consultation on requirements for its proposals on climate-related transition plans.
As part of its broader ambition for the UK to be the world leader in sustainable finance, the UK government is requiring “UK-regulated financial institutions (including banks, asset managers, pension funds and insurers) and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement”. To understand how best to deliver its policy on climate transition plans, the government has launched a consultation seeking views from the industry on different routes organisations might take and guidance that might be needed.
Background
Climate transitions plans are strategic roadmaps that help organisations to plan their transition towards net zero. Such a plan might include specific timebound targets and a detailed plan for how to achieve them across the different areas of an organisation.
The consultation seeks to deliver on a manifesto pledge to mandate credible transition plans for UK-regulated financial institutions and builds on the 2024 Transition Finance Market Review, which recommended clearer expectations for corporate climate planning to support capital allocation and risk management. It also builds on and seeks views on alignment with existing and forthcoming frameworks such as the Transition Plan Taskforce (TPT) and the UK Sustainability Reporting Standards (UK SRS).
Scope
Currently the requirement for climate transition plans is only expected to be aimed at UK-regulated financial institutions (including asset managers, banks, insurers, pension funds) and FTSE 100 companies. However other entities may be brought into scope over time, e.g. pension schemes and other large listed and non-listed entities.
Proposed Options for Climate Transition Plans
The consultation seeks views on the following:
The benefits and use cases of transition plans
The consultation proposes and asks for responses on the government’s assessment of the benefits and use cases of transition planning. These include for risk management, as part of investment strategies, and as a way to contribute to an economy-wide transition.
Implementation of transition plan requirements
This includes whether transition plans should seek to align with other proposed UK standards on sustainable finance including the Transition Plan Taskforce disclosure (TPT) framework published in 2023, and the draft UK sustainability reporting standards (UK SRS) published June 2025.
The consultation then outlines three main options for developing and disclosing a transition plan:
Explain-or-disclose. Firms must either publish a transition plan or explain why they haven’t.
Mandatory Disclosure. This would mandate a legal requirement to develop and disclose a transition plan, potentially integrated it into annual reporting.
Mandatory Implementation. This is the most stringent option and would require firms to develop, disclose, and implement credible plans aligned with net zero by 2050, climate adaptation, and nature goals.
Related policy and frameworks
The consultation proposes that climate transition legislation would align with other UK regulations and standards including the UK Net Zero Strategy, Voluntary Carbon and Nature Markets, as well as international standards such as ISSB, CSRD, and TNFD.
It then asks what support and/or guidance might be needed to help firms comply with the many overlapping regulations and standards.
The government is also seeking views on the related legal risks, costs, as well as the applicability and proportionality for smaller firms. Assurance and enforcement mechanisms are also under review.
Next steps
The consultation is open until 17th September, with final decisions expected later in the year. Consideration of consultation outputs and planning of next steps will be aligned with the consultation (to the same timeline) on the UK SRS (UK interpretation of ISSB standards – see more here ).
For more information on climate transition planning, please get in touch.
Further Reading
