Transition plans overview

Transition plans are essential tools for achieving net-zero targets by outlining how organisations will align their operations with climate goals, such as achieving net-zero emissions by 2050. These plans must be time-bound, clear, targeted, and credible. The report identifies that credible transition plans help enhance transparency, reduce climate-related risks, and improve decision-making for both issuers and investors. Asset owners, as both preparers and users of these plans, face the challenge of evolving standards, but this report provides a structured approach for navigating the development process.

The report compares several transition frameworks, including the Corporate Sustainable Reporting Directive (CSRD), the Glasgow Financial Alliance for Net Zero (GFANZ), and the Task Force on Climate-Related Financial Disclosures (TCFD). Key differences among these frameworks include ambition levels, sectoral focus, and geographic applicability. Asset owners are advised to select the framework that best aligns with their operational context and climate targets.

Leveraging alliance member activities to produce a transition plan

The report highlights that Net-Zero Asset Owner Alliance (NZAOA) members are already engaged in activities that can form the basis of credible transition plans. These activities, such as setting targets through the Target-Setting Protocol (TSP) and public climate commitments, overlap with many key elements required in transition plans. This provides a strong foundation for members to develop comprehensive strategies.

Asset owners are recommended to follow a structured process when preparing transition plans. This involves selecting a relevant framework, reviewing existing disclosures, mapping Alliance activities against framework requirements, and identifying any gaps. The report suggests that members should disclose transition plans either as standalone reports or as part of broader climate reporting.

Key dependencies: what else is needed to prepare a transition plan?

In preparing a transition plan, asset owners rely on key dependencies such as data from investee companies and asset managers. Scope 3 emissions, which account for a significant portion of financial institutions’ climate impact, must be accurately measured and reported. Collaboration between asset managers and investee companies is essential to ensure comprehensive data collection and transparency.

The report emphasises that transition plans must consider broader factors, such as climate policies, market dynamics, and the evolving landscape of climate-related regulations. It recommends ongoing engagement with stakeholders, including regulators and policymakers, to align transition strategies with emerging best practices.

Evaluating transition plans

The credibility of a transition plan hinges on several factors, including operationalisation, metrics disclosure, and progress reporting. The report highlights that credible plans should clearly outline how an organisation will achieve its climate targets, supported by detailed timelines and science-based evidence. Asset owners are encouraged to use quantitative metrics, such as greenhouse gas (GHG) reduction targets, and qualitative assessments to evaluate the effectiveness of transition plans.

When assessing transition plans, asset owners should focus on the alignment between the plan and an organisation’s broader climate strategy, as well as the consistency of progress reporting. Gaps in reporting or inconsistencies in the plan should be identified and addressed to enhance credibility.

Policy recommendations

The report recommends that regulators play an active role in supporting the development and disclosure of credible transition plans. It suggests that regulatory bodies work toward greater interoperability of frameworks, ensuring that organisations can comply with different standards without increasing their reporting burden.

For Alliance members, the report recommends continued public policy engagement, focusing on transparent and accountable lobbying efforts that align with net-zero goals. Additionally, it advocates for flexibility in regulations to accommodate the unique challenges faced by asset owners and financial institutions in their climate transition efforts.