Introduction

The climate crisis presents risks and opportunities, necessitating changes to business models. Financial planning is critical, but the CDP 2025 Corporate Health Check found that “just 9% of companies reported to have aligned at least 5% of their capital expenditure with their climate transition plan”. Transition planning helps organisations understand the consequences of action and inaction, ensuring long-term resilience.

About this guidance

Achieving net zero and climate resilience requires a clear top-down, long-term vision. Transition plans are strategic and must be integrated into governance as part of the board’s oversight. This vision must be incorporated into the three-to-five-year financial planning process, where important decisions about resource allocation are made.

Prepare

Finance teams play a critical role in aligning transition planning and financial planning, requiring a mindset shift. Financial planning typically focuses on a three-to-five-year horizon, whereas transition planning considers the short, medium, and long term. Build awareness by determining the boundary of the transition plan and setting objectives for net zero and climate resilience.

Understand position

Conduct a gap analysis by forecasting emissions and adaptation for your current business plan to understand your baseline trajectory. Focus on material impacts, evaluating how climate-related changes will affect revenues, costs, and assets. Estimate costs and savings associated with delivering the transition plan, such as capital expenditure for new infrastructure. Incorporate cross-sector and value chain considerations.

Prioritise

Prioritise actions based on feasibility, risk, costs, benefits, and emissions reductions. Resources are limited, so choose an impactful mix of actions aligned with wider goals. Allocate actions to different time horizons, sequencing them logically to support delivery of the transition plan.

Embed transition planning in the three-to-five-year financial planning process

Bring the top-down organisational net zero strategy into the financial planning process. This is a critical step that requires engaging with business units to obtain support. Provide clarity on expectations for business units to embed pathways, and collaborate with them to integrate transition actions into their plans.

Consider financing

Achieving the transition requires significant investment. The cost of not addressing climate change “equates to 11% to 27% of cumulative economic output”, whereas the required investment “equals 1% to 2% of cumulative economic output to 2100”. Finance the transition through mechanisms like sustainability-linked loans, equity, or government grants. Share the costs and benefits of the transition, and provide direct financial support to your value chain.

Improve decision making

Identify and remove blockers in decision-making processes to ensure net zero and climate resilience are considered. Decision makers need relevant information in an understandable format, including financial and emissions implications over the medium and long term. For example, sensitivity analysis showing sustainable fuel costs increasing by 5% can influence investment choices.

Monitor, analyse, report

Consider data capture and systems. Ensure management information is sufficient to deliver action by embedding carbon tracking at the source of financial transactions. Consider what to include in external reporting to meet growing expectations from regulators and investors for credible disclosures.