Today the IFRS has published new international guidance on transition plans, drawing on the work of the Transition Plan Taskforce (TPT). For companies already using TPT materials this is a welcome signal that their efforts can be integrated with broader disclosures against IFRS S2.
The new IFRS guidance marks an important step forward
Companies around the world are increasingly developing, implementing and disclosing climate transition plans, recognising the critical importance of addressing climate issues within wider business strategy.
As market practice matures, companies, investors and policymakers alike are calling for international consistency and comparability. In 2024 the G20 Sustainable Finance Working Group published high-level principles for transition plans for financial institutions and corporates which aimed to support international consistency and recognise and validate emerging best practice.
Also in 2024, the International Organisation of Securities Commissions (IOSCO) assessed current regulatory and industry practices, identifying the need for guidance for firms on transition plan disclosures which would support consistency and comparability. And, the Financial Stability Board recognised that consistency and comparability in transition plans would support regulators to ensure financial stability.
The IFRS Foundation has now taken a critical step towards plugging the gap with the launch today of its Guidance document ‘Disclosing information about an entity’s climate-related transition, including information about transition plans, in accordance with IFRS S2’.
This document marks the conclusion of years of development of guidance documents and of efforts towards convergence. Markets can now be confident that existing transition planning approaches which are using the work of the Transition Plan Taskforce (TPT) or the Glasgow Financial Alliance for Net Zero (GFANZ) can be consistently reported building on IFRS S2.
What does this mean in practice?
In this latest guidance, the IFRS Foundation builds on the TPT materials to provide further guidance to entities on reporting information about their transition plans in line with IFRS S2. The guidance will be useful for those companies who are just setting out on their transition planning journey. It will also be valuable to companies who are already using leading frameworks, such as those developed by the TPT or GFANZ, and who want to understand how this information can be integrated into their ISSB-aligned disclosures.
The visual below shows how transition plans prepared using the TPT and GFANZ five key elements align with IFRS S2. (This is a high-level description; more detailed technical mapping is provided in the IFRS’s guidance (p. 61 ff.).
How did we get here?
In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards provide a global baseline for sustainability-related disclosures. They also include several disclosure requirements that are related to an organisation’s transition and transition planning.
Recognising the rising importance of information about transition plans within companies’ wider sustainability reports, the ISSB announced in 2024 that it will take further steps to support the harmonisation of disclosures about transition plans.
In October 2024, the IFRS Foundation assumed responsibility for the disclosure-specific materials developed by the Transition Plan Taskforce (TPT). These can be accessed via the IFRS Knowledge Hub here. Today, the new IFRS Foundation guidance marks the next stage on the journey.
What are the next steps?
We expect to see more jurisdictions adopting the IFRS S1 and S2 and putting in place local regulations. We also expect companies to continue using the suite of TPT materials to develop credible transition plans. The new transition plan guidance published by the IFRS is an important milestone in the journey towards globally consistent and comparable transition plan disclosures and the scaling of credible transition finance markets.
Authors: Ira Poensgen (Strategic Adviser, ITPN) and Jacques Morris (Head of the ITPN)