Chancellor Rachel Reeves’ recent Mansion House speech stressed the importance of economic growth and gave a strong signal of the Treasury’s commitment to sustainability. Her speech included announcements on topics from pensions to digital gilts, and consultations were launched on the UK’s Green Taxonomy, regulation of ESG ratings providers and much more. However, the long-awaited transition plan consultation was again absent – now due in “the first half” of next year.
In this blog, we examine what was announced on the UK’s disclosure regime and what needs to happen next on transition plans, interoperability and international leadership to realise the government’s goal of the UK as the “world’s leading green [and transition] global financial centre”.
- Lack of action is holding back investment. Transition plans are critical to scaling green and transition finance and ensuring economy-wide stability and competitiveness. Despite signalling the Treasury’s commitment to sustainable finance, the Mansion House package did not deliver the long-awaited consultation on mandatory transition plans.
- The UK has an opportunity to lead on this agenda. Beyond endorsing ISSB standards as a global baseline, the government must ensure its regulatory framework is compatible with, and matches the ambition of, the EU’s.
- There are clear next steps. The government must deliver a roadmap for phased implementation of its manifesto pledge for mandatory, 1.5°C-aligned transition plans. This begins with mandatory transition plans for large private sector companies.
Why transition plans are an important item on the government’s agenda
In the Financial Services Growth and Competitiveness Strategy consultation, launched alongside the Chancellor’s speech, HM Treasury positioned transition plans as a key deliverable to “lay the foundations for future growth in the UK’s sustainable finance market” – one of their five identified areas for financial sector growth.
Whilst transition plans undoubtedly have a role in scaling sustainable finance, the true value of transition planning is economy-wide. Future-fit transition plan requirements are a cornerstone of a competitive, global, regulatory landscape. Transition plans are essential to unlocking the stability and competitiveness needed to enable investment into the wider UK economy and into the global climate transition.
Transition plans provide stakeholders with information on how a company will meet climate goals, manage risks and opportunities, and contribute to economy-wide transition. Credible, transparent, and well-defined private-sector transition plans provide investors with the confidence to invest in companies, both accelerating their paths to net zero and growing the economy.
Announcements show the government’s direction of travel on sustainable finance
Through letters to regulators, consultation publications and both Reeves’ Mansion House appearance and Lord Livermore’s earlier speech at COP29, the government gave the following update on its direction of travel on sustainable finance:
- Reaffirmed in letters to regulators (FCA, PRC, FPC, PSR) that the government’s economic policy objectives include to “accelerate the transition to a climate resilient, nature positive, and net zero economy”. Also mentioned when reaffirming the remit for the Monetary Policy Committee (MPC) for the coming year.
- 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.
- Launched consultations on the UK Green Taxonomy and on the regulation of ESG ratings providers.
- Launched a call for evidence on the wider growth and competitiveness of the UK’s financial services, including green finance and the regulatory landscape. The results of this consultation will feed into the UK’s industrial strategy.
- Launched a Transition Finance Council in partnership with the City of London Corporation.
What needs to happen next on transition plan disclosure
Delivery of transition plan requirements
In its manifesto, the government made a pledge to require mandatory, 1.5°C-aligned transition plans for large corporates and financial organisations. This requirement will constitute the bedrock of policy to align the private sector behind national climate goals and dovetail neatly with the government’s new industrial strategy to help deliver greater stability and sustainable growth across the economy.
While the commitment to “consult in the first half of next year on how best to take forward the manifesto commitment on transition plans” is welcome, this is a complex policy which will need to be phased in multiple steps. A roadmap to delivery of this policy must be released as soon as possible to give a clear market signal and allow companies to set in motion their planning.
The government must kick off the first step – mandatory transition plans for all large companies – immediately to avoid delaying the entire timeline. The consultation should be published in early Q1 to align with an accelerated ISSB endorsement process. The government should consult on mandatory disclosures based on the Transition Plan Taskforce guidance, which has been recognised internationally as best practice, taken up by the IFRS and developed as part of an extensive consultative process with finance, corporates, regulators, government and civil society.
Interoperability
While considering regulatory design, the government has rightly prioritised interoperability with other jurisdictions. Compatibility will simplify reporting for companies and make it easier for stakeholders and investors to analyse and compare plans. Alongside ISSB endorsement, a priority should be interoperability with the EU as the UK’s closest partner.
The UK must ensure its regulatory framework is compatible with, and matches the ambition of, the EU’s. This will minimise complexity for companies as they disclose and encourage EU-based investors to invest in the UK.
Driven by incoming regulations in foreign jurisdictions, multinationals are preparing to disclose transition plans that align with climate targets. Most relevantly, UK-based companies that have large, listed EU subsidiaries have been preparing to disclose under the European Sustainability Reporting Standards (ESRS) framework (which promotes ”1.5-degree compatible plans”) and Corporate Sustainability Due Diligence Directive (CSDDD) requirements (which mandates them).
International leadership
In updating its regulatory landscape, the UK has an opportunity to step forward as a leader and bridge-builder in relation to sustainability disclosures and transition plans. ISSB endorsement is a critical first step to signal the UK’s continued commitment to this agenda. The UK must also increase its ambition beyond this international baseline if it wishes its regulatory landscape to be truly competitive.
The UK is already engaging on transition plans through international forums including the Financial Stability Board, IOSCO, IPSF, NGFS and G20. The UK has said that it will join the new International Transition Plan Network. Other relevant engagement opportunities could come from working with the UN Secretary General’s Net Zero Taskforce, and from talks with European member states, especially France and Germany. The UK has a wealth of opportunity to lead the field, starting with strong domestic action.
