EU Platform on Sustainable Finance publishes report on transition plans with recommendations for the European Commission

On 23 January 2024, the EU Platform on Sustainable Finance (PSF) published a Report on Building trust in transition: core elements for assessing corporate transition plans. The Report aims to guide companies in developing their transition plans and to assist financial market participants (FMPs) in assessing these plans. 

It provides an overview of the EU legal framework on transition plans and offers recommendations to the European Commission for targeted policy interventions. Although the Report primarily focuses on climate mitigation, the PSF recognises the importance of addressing other environmental goals, including adaptation.

The PSF advises the Commission on the implementation and usability of the EU Taxonomy and the broader sustainable finance framework. In December 2024, the Platform’s mandate was extended by three months, until the end of March 2025, to enable the completion of outstanding work. 

The Report highlights useful tools that can enhance the robustness of corporate transition plans. For instance, including asset or activity-level information, as required by EU Taxonomy or EU ETS, can help companies clearly demonstrate their decarbonisation efforts and present information in a way that allows for comparison across companies within the same sectors. 

The PSF urges the Commission to develop policy frameworks that will enable corporates to prepare transition plans for due diligence and sustainability reporting in a consistent and coherent manner.

The PSF has identified the following guiding principles for FMPs to use, on a best-effort basis, when assessing transition plans: 

• Ambition, environmental and social integrity (DNSH): When assessing transition plans, FMPs should examine whether the targets outlined in the plan are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5°C, in line with the Paris Agreement.
• Consistency & feasibility: FMPs should assess whether the elements of a transition plan align with the company’s business strategy and ambition, ensuring that mitigation actions and decarbonisation levers are feasible given external dependencies and disclosed assumptions, as well as the relevant time horizons and regions.
• Transparency & completeness: FMPs should work with clients and portfolio companies to encourage corporate transition plans that are publicly available and include all relevant information about the company’s strategy.

According to the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D), the PSF believes FMPs should consider the following core elements when assessing transition plans for climate change mitigation: 

1. science-based and time-bound targets, along with impact metrics disclosures (e.g. scope 1, 2 and 3 gross GHG emissions disclosures); 
2. key levers and actions to reach targets, including fossil fuel phase-outs where relevant; 
3. financial planning: investments and funding supporting the plan and CapEx related to fossil fuel activities; and 
4. governance and oversight, including disclosure on alignment with overall business strategy and implementation progress. 

The Report elaborates on how to assess these elements. 

Recommendations to the Commission: 

• Develop a common transition plan template for non-financial undertakings, based on the EU framework. Key areas to be addressed include mitigation, adaptation, just transition, other environmental objectives when material. This should be solely based on existing disclosure requirements and should not add additional reporting for companies. However, the Report does not suggest such a template.
• Develop a checklist of core elements FMPs should consider when assessing corporate transition plans for the purposes of providing transition finance in the EU. This checklist should be based on the recommendations set out by the Platform on Sustainable Finance (PSF) in section 2 of the Report.
• Develop sectoral transition pathways for high-emitting sectors at the EU level, complete with technology roadmaps. Such pathways are essential for supporting the preparation and assessment of sector-specific transition plans.
• Provide guidance for selecting scenarios that can be used for credible science-based corporate target setting and transition planning.
• Consider robust transition plans as a valuable source of information for discussions on future decarbonisation initiatives and infrastructure planning.
• Conduct further work to adequately account for the depreciation of assets at risk of becoming stranded, the impact of embedded emissions in fossil fuel reserves, and the identification of carbon lock-in associated with new investments.
• Develop a monitoring framework or public registry of emission reduction data per sector to track implementation of transition plans at company and sector-level.
• Provide guidance on how adaptation and just transition can be further incorporated into climate mitigation plans, along with the full integration of any other environmental objectives that are material to the company.

The PSF also recommends that the Commission develops criteria for qualifying targets as credible science-based targets, including: 

1. Alignment with the Paris Agreement: targets must be consistent with limiting global warming to 1.5°C above pre-industrial levels, in line with the Paris Agreement. 
2. Comprehensive emission coverage: targets should cover all of the company’s greenhouse gas (GHG) emissions (Scopes 1, 2, and 3) with clear justification for any exclusions. 
3. Time-bound and measurable commitments: include mid-term targets (e.g., 2030) as well as long-term targets, ensuring both near-term action and long-term strategic planning. 
4. Sectoral and regional relevance: targets should be based on sector specific and regional pathways or adopt an international scenario and corresponding pathway aligned with a 1.5°C target with little to no overshoot. When European pathways, in line with the EU goal of achieving net zero by 2050 become fully available, companies could also use these as a default option. 
5. Use of absolute and intensity-based metrics: where relevant, both absolute and intensity-based metrics should be used to account for potential business growth while ensuring emissions reductions. 
6. External assurance and review: targets should undergo external assurance to validate credibility, using the same pre- and post-issuance review standards as outlined in the European Green Bond Standard. 
7. Compliance with EU Legislation: Science-based criteria should adhere to European-level guidelines, including the CSRD/ESRS, CSDDD, Green Claims Directive, and Carbon Removal Certification Regulation. 
8. Supervision and accountability for reviewers: entities providing certification or "second opinions" must be supervised and registered, meeting conditions similar to those set out in the European Green Bond Standard to prevent greenwashing. 
9. Consistency and comparability: targets must enable comparability across sectors and regions, supported by transparent methodologies and data disclosure. 
10. Due process and accountability: a clear process for establishing, monitoring, and enforcing these criteria should be established to ensure the integrity of transition finance mechanisms.

The Report complements the anticipated EFRAG Implementation Guidance on Transition Plans, which is being developed in the context of the Corporate Sustainability Reporting Directive (CSRD). The EFRAG Sustainability Reporting Technical Expert Group (SR TEG) adopted the draft implementation guidance on 23 January 2025. The EFRAG Sustainability Reporting Board (SRB) discussed the draft on 29 January 2025 but has not yet approved it. The EFRAG SRB will continue discussions on the draft during one of the upcoming meetings. The draft implementation guidance is expected to be published for public consultation by EFRAG for two months, from mid-February to mid-April 2025.

For more materials on transition plans and transition finance, please visit our dedicated page Climate transition planning & transition finance.