The Evolving Landscape
In recent years, climate transition plans have become vital strategic tools for businesses to reduce emissions, manage climate-related risks and opportunities, and contribute to the economy wide transition.
They have evolved from purely voluntary initiatives to being seen as a fundamental tool by policymakers and regulators to support the transition. A heightened focus on standardisation and regulatory requirements has accelerated their adoption globally, with significant developments in 2024 emphasising their growing importance.
According to the CDP 2024 report, the number of companies disclosing 1.5°C-aligned climate transition plans increased by 44% from 2022, with 5,906 companies reporting such plans. Year on year, we can see a steady shift towards a higher quantity of accountable climate strategies. Transition plans are now recognised by corporates both as critical tools for internal change management as well as to demonstrate their environmental credentials, and their actions to back them up, to markets, investors, and regulators.
Globally, transition plans play a vital role in the allocation of transition finance to enable global decarbonisation and climate resilience efforts, aligning corporate actions with broader climate goals.
Transition Plans on the Global Agenda
The global significance of transition plans was evident in recent discussions at the G20 under the Brazilian Presidency where the Task Force on a Global Mobilization against Climate Change (TF-CLIMA) emphasised the role transition plans can play to embed a long-term strategy for transition and help financial institutions and corporates mitigate risk and seize transition-related opportunities.
The G20 Finance Ministers welcomed detailed work undertaken by the G20’s Sustainable Finance Working Group across 2024 to produce high-level principles for private sector transition plans. The principles underline the importance of transition plans in managing sustainability-related risks and opportunities and are a step forward in shared global norms.
Alongside the G20 there are multiple processes underway to build a shared understanding of the role of transition planning within most, if not all, of the major multilateral networks of financial regulators and standard setters.
- The Network for Greening the Financial System (NGFS) published a package of transition plan papers including guidance on the interaction of financial sector and real economy plans; considerations for emerging markets and developing economies; and the micro-prudential perspective on transition plans.
- The International Organization of Securities Commissions (IOSCO) released a report at COP29 exploring how transition plans can support its objectives of investor protection and market integrity.
- The Financial Stability Board Transition Plans Working Group expects to release a paper considering the relevance of transition plans to financial stability, including how information from transition plans could support financial stability monitoring.
Transition plans also featured heavily at COP29, with the UN Secretary-General urging non-state actors to create accountable transition plans by COP30 and collaborate with governments during a high-level event on the Stocktake of Integrity Matters – Implementation of the High-Level Expert Group (HLEG) on Net-Zero Commitments. A progress review “Integrity Matters: The Hard Work is Now” by HLEG Chair Catherine McKenna highlighted that while voluntary commitments and plans are increasing, robust standards and government mandates are urgently needed to align climate action with the Paris Agreement. Alongside this, the Taskforce on Net Zero Policy released two reports on progress in implementing net zero policy measures, including transition plans.
Regulatory Developments Driving Adoption
In June 2024, the International Financial Reporting Standards (IFRS) Foundation assumed responsibility for disclosure-specific materials developed by the UK’s Transition Plan Taskforce (TPT). These materials now support disclosures under the International Sustainability Standards Board (ISSB) Standards – IFRS S1 and S2 – the global baseline for sustainability-related financial reporting.
Thirty jurisdictions are now on the path toward introducing ISSB Standards in their legal or regulatory frameworks, with some jurisdictions also putting in place specific transition planning rules or requirements. For example, Australia will adopt IFRS S2 aligned disclosure standards from January 2025, with best practice guidance for transition plan disclosures expected by the end of that year. Brazil, moving from voluntary use in 2024, will make IFRS S1 and S2 mandatory by 2026 and has consulted on standardised disclosure of transition plans for banks.
Malaysia will phase in IFRS S1 and S2 for large companies between 2025 and 2027, with its regulators prioritising support for industry to develop credible transition plans, while Singapore will implement IFRS S2 for listed companies by 2025 and large unlisted firms by 2027 and is the process of developing transition planning guidelines for the financial industry. Switzerland has mandated climate-related reporting, including transition plans, for public companies, banks, and insurers as of January 2024.
In the EU, the Corporate Sustainability Reporting Directive (CSRD) requires in scope companies to disclose information on their transition plan or explain why they do not have one, with a phased introduction between 2024 and 2028. This is complemented by the Corporate Sustainability Due Diligence Directive (CSDDD) requirement for the largest companies to adopt and put into effect transition plans compatible with 1.5°C, with a phased introduction between 2027 and 2029. Transition plans are also included within other EU regulations including the Capital Requirements Directive (CRD) and Solvency II.
The UK government has also recently signalled the launch of a transition plan consultation in the first half of 2025 alongside a consultation on UK Sustainability Reporting Standards (SRS) disclosure requirements for ‘economically significant’ companies in line with ISSB standards, following a manifesto pledge. The current government’s manifesto pledge for mandatory 1.5°C-aligned transition plans.
An Unprecedented Opportunity
Continued momentum in markets and governments in relation to transition plans presents an unprecedented opportunity. Standardised frameworks, practical resources, and alignment across jurisdictions can prevent fragmentation and ensure coherence in global efforts. Quality and consistency of transition plans will also increase as more investors and regulators require companies to deliver credible and actionable plans. To fully realise their potential, continued acceleration of regulatory harmonisation, capacity-building efforts, and innovative financial mechanisms are required.
In this context, initiatives such as the International Transition Plan Network (ITPN), launched by E3G, will foster collaboration and support aligning global norms.
The progress of 2024 has demonstrated that transition plans are not merely a regulatory compliance exercise; they are part of business strategy, and a critical framework for achieving sustainable economic growth while also meeting climate goals. As governments, businesses, regulators, and stakeholders collaborate, climate transition plans will play an increasingly central role in shaping a sustainable and resilient global economy.
Authors: Jacques Morris (Head of the ITPN) and Kate Ryan, (Strategic Partnerships Manager, ITPN).