Climate Transition Plans
Accelerating climate leadership
What is a Climate Transition Plan?
A climate transition plan is a time-bound action plan that outlines how a company will take credible, immediate-term steps to transition its strategy and operations to align with the 1.5°C trajectory recommended in the Paris Agreement.
Climate transition plans are future-oriented, detailed and focus on specific, short-term actions a business is taking that work incrementally towards achieving its long-term goals.
Governments, regulators and investors across the world are increasingly focused on the need for transition plans, because they recognise the vital role these play in enabling companies to navigate the shift to a low-carbon economy.
For more guidance on developing and implementing a credible climate transition plan, as well as corporate climate disclosure, please see the following resources:
Task Force on Climate-Related Financial Disclosures (TCFD) – The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information.
The International Sustainability Standards Board (ISSB) – The ISSB is developing standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets. In some markets these will replace TCFD guidelines
Transition Plan Taskforce (TPT) – In 2021 the UK government created the Transition Plan Taskforce, which is currently consulting on a disclosure framework with recommendations for companies and financial institutions to develop gold-standard transition plans.
The Science Based Targets initiative (SBTi) – The Science Based Targets initiative (SBTi) drives ambitious climate action in the private sector by enabling organisations to set science-based emissions reduction targets.
Key elements of a climate transition plan:
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Short-term targets required: 5 year and science-based
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Average absolute Scope 1-3 emissions reduction of 7-8% pa to 2030
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Phase out fossil fuel use and production, no financing of new supply
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Executive compensation, strategy and lobbying aligned with plan
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Necessary capex commitments, R&D for decarbonization technology
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End deforestation, credible use of offsetting only if strictly necessary
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Independent auditing of emissions
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Annual performance reporting to shareholders
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What makes a climate transition plan inadequate?
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Targets without an executable plan are inadequate.
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Emissions disclosure alone is inadequate – emissions must be reduced 50% by 2030.
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A long-term target (beyond 10 years) without a short-term plan (5 years) is inadequate – it is imperative governments make 5 year climate transition plans mandatory.
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Additional resources
Further information, guidance, and support to help you accelerate shareholder action on climate change.
Take action now: A step-by-step process
Join the investors leading the way to a net-zero economy. Start taking ambitious climate action with climate transition plans.
Learn more about each stage of the process and start your journey to net-zero emissions.
FAQ
The details of each company’s climate transition plan will vary case-by-case but the principles of transparency and accountability are the same. Plans must include clear targets, specific actions, strong governance and an annual shareholder vote.
The first step is to enter into dialogue with company management. Debate is healthy and can lead to the right outcome without investors needing to file a shareholder resolution. If companies refuse to disclose adequate climate transition plans or any other climate-related commitments then shareholders may consider filing a shareholder resolution demanding that the company publish one. The investor’s right to file shareholder resolutions will depend on the local law where the company is incorporated. ClientEarth and Institutional Investors Group on Climate Change (IIGCC) have produced a guide for institutional investors to be used to guide them on the procedures on filing climate-related shareholder resolutions in Europe.
Benchmarks for measuring the quality of a company’s climate transition action plan are already widely available and continuously improving. If a company fails to make adequate improvements to its climate transition plan in response to a shareholder engagement, then shareholders may consider filing shareholder resolutions or using routine votes aimed at holding key individuals accountable for failing to implement a credible climate transition plan. These actions could include: demanding executive remuneration is linked to emission reduction targets; demanding removal of members of certain committees (e.g. audit) and/or the management or the board of the company. This approach is additional to, not instead of, other voting practices relating to climate change.
The United Nations Environment Programme estimates that GHG emissions need to be reduced at an average rate of 7% every year until 2030 to achieve net zero emissions. Investors must therefore ensure that companies are held accountable for their progress each year, by voting on Say on Climate proposals as well as board appointments, accounts and remuneration.