Firms will increasingly be pushed to report on their transition plans. Indeed, the TPT’s proposed framework for mandatory transition plans will likely be integrated into the FCA’s rulebook for those firms that are already subject to mandatory Taskforce on Climate-related Financial Disclosures (TCFD) reporting.
Transition planning is only one of the avenues through which firms will need to engage with climate and nature, with reporting and disclosure requirements set to continue to occupy a prominent place in the broader policy landscape. The foundational structure of corporate sustainability reporting requirements and the schedule for future developments is largely set, but substantial areas of detail remain to be detailed or agreed (and there is uncertainty whether timelines can be met).
Work is continuing at the international, regional and national levels, and firms operating across borders will face the corresponding challenge of reconciling multiple frameworks. Internationally, the International Sustainability Standards Board’s (ISSB) first set of standards is due to be finalised early this year, with the issue then becoming to what extent countries align their own reporting and disclosure frameworks with it.
Some countries, including the UK, will look to consolidate reporting and disclosure within the ISSB’s framework. Others, including the EU, will look to deliver outcomes consistent with the ISSB, but with distinctive elements, as with the EU’s Corporate Sustainability Reporting Directive (CSRD). In parallel, the nature-focused work of the Taskforce on Nature-related Financial Disclosures (TNFD) will also continue at the global level, creating further questions as to how far its final format – to be delivered in September 2023 – will be aligned with the ISSB, and to what extent it will be incorporated into binding domestic rules.
The unknowns for firms include whether the planned “handoffs” of information between initiatives (e.g. as corporate disclosures feed into Article 8 disclosures under the EU Taxonomy) will work; the extent to which developments in the quality and availability of data will keep pace with disclosures; and the extent to which the potential for a proliferation of standards and requirements will be reined in.