UK government consults on transition plans, keeping its options open

On 25 June 2025, the UK government published three consultations (see press release):

• The Department for Energy Security and Net Zero published a consultation on transition plans - see here.
• The Department for Business and Trade (DBT) published Exposure Drafts of the UK Sustainability Reporting Standards (UK SRS) for consultation - see here. The UK SRS will implement the ISSB's sustainability disclosures standards (IFRS S1 and IFRS S2) into UK law. 
• The DBT has also published a consultation on the government's proposal for greater regulatory oversight of third-party assurance services for sustainability-related financial disclosures - see here. 

This blog post focuses on the transition plan consultation. 

The basics 

The transition plan consultation document can be accessed here. 

The consultation closes on 17 September 2025. 

The government committed in its Manifesto to mandating “UK-regulated financial institutions (including banks, asset managers, pension funds and insurers) and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement”.

The TP consultation seeks views on on each element of this commitment: 

• designing a transition plan; 
• disclosing the plan; 
• having a plan aligned with climate ambition; and 
• implementing a plan. 

At this stage, the government is keeping all its options open. It has not yet decided whether to make transition plans mandatory and, if so, for which type of entities. It will be considering the pros and cons of various options. The government has said it will consult again on the detail of any future obligations. 

The government sees transition plan requirements as vital to achieving its growth and clean energy missions and securing the UK's position as the “green finance capital of the world". 

Robust transition plans can help entities and investors manage and properly price risks and help to stimulate investment. The government believes this provides a huge opportunity for economic growth, including for the financial services sector: “clean energy is the economic and industrial opportunity of the 21st century”. The UK will need £130 billion of investment into the transition each year on average to 2050 to meet its net zero by 2050 target, the majority of which will need to come from the private sector. 

One of the key objectives of the TP consultation is to deliver decision-useful and credible information about sustainability and climate-related financial risks and opportunities to investors.

Any government decisions on transition plans will need to be aligned with the government’s ambition to reduce the costs of regulation for business by 25%. The objective is to ensure that transition plan requirements generate robust and decision-useful information for investors and other stakeholders, while not being overly burdensome for companies and financial institutions to meet.

The government is approaching the development of the UK's future sustainability reporting framework in a phased manner. The first phase involves the transition plan consultation, the consultation on the draft UK SRS and the consultation on sustainability assurance. There will then be further phases of consultation, which will cover proposals on sustainability reporting and assurance. 

The government has said it will work closely with the Financial Conduct Authority (FCA), which sets disclosure requirements for listed companies and FCA-regulated financial institutions. The FCA intends to consult on strengthening its expectations for listed companies’ transition plan disclosures as part of its broader consultation on implementation of UK SRS for listed companies. 

The government has pointed out that sustainability disclosure and sustainability assurance requirements that may be introduced via the Companies Act 2006 will be dependent on future legislation. However, future reporting requirements introduced by the FCA can come into effect earlier.

There will also be a separate government consultation on streamlining the UK’s current non-financial reporting framework under the Companies Act 2006. That consultation, which will be delivered as part of the Non-Financial Reporting Review, will focus on updating the structure of the Annual Report so that it can integrate sustainability related reporting requirements, whilst also removing redundant and duplicative requirements that have built up over the years. The updated framework will seek to ensure that only information that is decision-useful is required to be disclosed and that this is provided in a format that best meets the needs of investors and other users.

Use cases for transition plans 

The transition plan consultation is seeking views on: 

• whether organisations already produce, or intend to produce, a transition plan and disclose it publicly;
• what specific challenges or obstacles organisations face in preparing their transition plans;
• whether organisations are using the materials prepared by the UK Transition Plan Taskforce (TPT) (which are now managed by the ISSB) - and, if so, how and if there is further guidance that would be helpful; 
• what role stakeholders would like to see for the TPT disclosure framework in any future obligations the government might take forward; and
• how users (such as investors) use transition plans.

(For further information on the TPT materials, see our Transition planning collection.) 

Requirements in the draft UK SRS 2 relevant to transition plans 

The forthcoming UK SRS S2 on climate change disclosures (which is the subject of a separate consultation) will not require an entity to have a transition plan or to set climate targets in line with a particular climate goal. 

However, the UK SRS 2 will require disclosures of a proportion of the information that frameworks such as TPT state should feature in a transition plan. As a result, disclosures made in accordance with the UK SRS 2 may provide investors with useful information about how an entity is responding to the transition and its level of ambition to decarbonise its operations.

The strategy obligations within the draft UK SRS S2 will require those entities that have a transition plan to disclose information about that plan, including information about the key assumptions and dependencies upon it relies. These obligations are designed to ensure that information regarding a transition plan can be considered within the context of disclosures relating to an entity’s wider business strategy.

Although UK SRS S2 will contain many obligations that cover information relating to transition plans,  it does not explicitly require disclosure of a transition plan, nor set out what information is expected to be included within a transition plan.

The government is seeking views on the extent to which investors and other market participants believe that the UK SRS S2 will provide them with useful information regarding an entity’s transition plan and how it is preparing for the transition to a low-carbon and climate resilient economy. This feedback will inform government decisions about whether to require companies to report information in accordance with UK SRS. 

If stakeholders believe the draft UK SRS S2 does not provide sufficient information, they are asked to explain what further information they would like to see.

Developing and disclosing a transition plan 

The government is considering two options:

• require entities to explain why they have not disclosed a transition plan or transition plan-related information; or
• require entities to develop and disclose transition plans.

With Option 1:

• As explained above, the forthcoming UK SRS S2 will not require an entity to have a discrete transition plan or to set climate targets in line with a particular climate goal, but the disclosures made in accordance with that standard may provide investors with useful information about how an entity is responding to the transition and its level of ambition to decarbonise its operations. 
• One of the options would be for the government to require entities that have not published a transition plan, or disclosed transition plan-related information in accordance with UK SRS S2, to explain why that is the case. 
• Under this option, the government would not require companies to produce distinct transition plan documents separate from annual reporting, but entities would be free to produce transition plan documents on a voluntary basis if they choose to do so. Companies that have not published a transition plan, or disclosed transition plan-related information in accordance with UK SRS S2, would be compelled to explain why that is the case - giving investors and other stakeholders information about a company’s reasons for not developing a transition plan.

With Option 2:

• The government would require entities to develop a transition plan and disclose transition plan related information as part of its annual reporting and could also require entities to publish a separate transition plan document. 
• Publishing a separate transition plan document would be in line with the TPT’s recommendations that entities should publish a standalone transition plan document at least every three years.
• The government is seeking views on the advantages and disadvantages of mandating entities to publish a standalone transition plan document, distinct from mandating entities to develop a transition plan and disclose any transition plan-related information as part of their annual reports. The government acknowledges that some entities may not have a distinct transition strategy that is separable from their general risk management and business planning processes. 
• The government is also seeking views on whether the government should apply a financial materiality filter to any future requirement it may develop or whether it should consider broader approaches, like impact materiality.
• The government is also seeking views on whether this option can be realised within the government’s objective to simply the UK’s corporate and non-financial reporting framework and reduce the administrative costs of regulation for business by 25%.

Mandating transition plan implementation

The government is seeking views on mandatory transition plan implementation and whether  current market mechanisms and investor pressure are sufficient to encourage companies to meet their targets.

This option would introduce a mandatory requirement on entities to deliver on the elements of their plan that are under their operational control. 

If the government pursues this option, there would need to be consideration with stakeholders of what accountability mechanisms would be most appropriate. The government acknowledges it would need to strike a careful balance between accountability and flexibility.

The government is aware that there are uncertainties and dependencies that may impact the deliverability of a plan, and the government would not want to create undue legal risk for entities that have, through best efforts, attempted to deliver upon their targets and transition plan. At the same time, the government would want any requirement for an entity to implement their plan to have legal force and consequences if the entity did not take sufficient steps to meet such an obligation.

If the government pursues this option, it would take additional time to develop more detailed requirements and the government says it would work closely with industry to ensure implementation requirements are proportionate.

The government is also seeking views on how transition plan obligations are being implemented internationally, in particular in the EU where proposals under the Omnibus simplification initiative is seeking to make changes to the requirement in the Corporate Sustainability Due Diligence Directive (CSDDD) to “put into effect transition plans”. (For more information on the EU Omnibus, see our separate blog post and Omnibus Tracker.)

Aligning transition plans to net zero by 2050

The government is seeking views on how companies, pension funds, and financial institutions align their transition plans with net zero by 2050. 

This reflects a call from stakeholders, such as the Transition Finance Market Review, for the government to consult on “what 1.5°C alignment could mean, and which sectoral approaches and existing mechanisms will inform this”.

The government is consulting on design choices for potentially aligning transition plans to net zero by 2050, with interim (5-10 year) targets aligned with 1.5 C pathways.

There are currently no legal obligations for individual companies, pension funds, or financial institutions in the UK to align their activities with net zero by 2050, but some UK companies have publicly stated that their plans are aligned and have used existing tools and frameworks to support this (including the Science Based Targets initiative (SBTi), CDP, the Transition Pathway Initiative, and the World Benchmarking Alliance) or or have developed their own internal target setting tools based on existing global pathways from organisations such as the IPCC and the IEA.

The government is seeking views on standards and methodologies that are or could be used for corporate and financial institution climate-aligned target setting and transition planning - as well as views on the opportunities and challenges faced by companies operating in hard-to-abate sectors to set targets and transition plans aligned with net zero by 2050. 

The government recognises there may be legal implications for organisations in relation to aligning their transition plans to net zero by 2050 and is seeking views on the nature and extent of any such legal implications.

Some options the government may be willing to consider include: 

• Introducing a requirement for entities to disclose how aligned their transition plan is with net zero by 2050, including whether they have set interim targets (e.g. 5-10 years) aligned with 1.5°C pathways.  
• Introducing a requirement for entities to develop and disclose a transition plan that is aligned with trajectories to meet net zero by 2050, including setting interim targets (5-10 years) aligned with 1.5°C global pathways. 
• Introducing a requirement for entities to develop, disclose and implement a transition plan that is aligned with trajectories to meet net zero by 2050, including setting interim targets (5-10 years) aligned with 1.5°C pathways. 

Climate adaptation and resilience alignment

The government is interested in exploring how companies can be supported by transition plans in taking further actions to build resilience and adapt to climate change over a longer time horizon.

The Climate Change Committee recommends that effective adaptation requires planning for 2°C of warming, and considering the risks associated with 4°C. The government would welcome evidence to understand the extent to which companies are already considering 2°C and 4°C global warming scenarios and where companies are already using these.

However, the government says it has no immediate plans to require companies to take specific actions to address the risks they identify through their risk analysis or to ensure their business is resilient in line with 2°C and 4°C global warming scenarios. Rather, the government is keen to understand stakeholders’ views on what steps it could take to improve entities’ climate adaptation and resilience planning, in a way that is proportionate and aligns with the government's commitment to reduce the administrative costs of regulation for businesses by 25%.

Nature alignment

The government is seeking views on how nature can be considered holistically alongside climate in transition plans. 

It acknowledges that this is an area where policy is less developed than for climate transition and that any future nature requirements would be developed over a longer time horizon and would be subject to further consultation if taken forward.

There are a number of steps the government may consider, such as: 

• Considering the integration of nature transition disclosure frameworks which are being developed by international bodies -  for example, the Taskforce on Nature-Related Financial Disclosures (TNFD) have published draft guidance on nature transition plans. 
• Supporting the development of market-led ‘nature positive’ sectoral pathways for high-nature impact sectors (such as water, agriculture and the built environment as a starting point). 
• Introducing support for solving nature-related data gaps, providing guidance for organisations, and considering potential regulation or other policy which may be needed to help support companies in their nature transition.

Scope 

The commitment in the government’s Manifesto was that UK-registered financial institutions and FTSE100 companies would fall into scope of transition plan requirements. 

This needs to be considered against the government’s plans to consult on whether to require reporting against UK SRS for economically significant companies and the FCA’s forthcoming consultation on implementing the UK SRS for listed companies. 

The government is therefore considering whether to redefine the scope of entities under any future transition plan requirement. 

However, the government is clear that it wants any future requirements to be proportionate and that the focus will be on economically significant entities (including pension funds) where there is likely a significant investor and public interest. As a result, small to medium-sized companies are not envisaged as being within the scope of any future requirements set by the government. 

The government also notes that the FCA has independent decision-making powers for companies in scope of any future transition plan requirements they set.

The government also wants to ensure the scope of any future requirements does not impact the attractiveness of the UK as a listing destination by creating additional or unnecessary burdens for firms looking to go public.

The government is therefore seeking views in the transition plan consultation on:

• the factors the government should consider when determining the scope of any future transition plan requirements;
• the impact on supply chains of large entities that may be in scope of transition plan requirements and how the government could ensure any future requirements have a proportionate impact on these smaller companies within the supply chain; and 
• how the government could redefine the scope to protect the competitiveness of the UK’s public markets.

Legal risk 

The government is seeking views on the degree of legal risk associated with the publication of transition plan-related information, either voluntary or mandatory. 

The government would also welcome views on the current legal implications for company disclosures in the UK. 

In particular, section 463 of the Companies Act 2006 has the effect of providing legal protection to company directors where they are disclosing forward-looking information or disclosing estimates or information that is reliant on third parties. The government is considering whether similar provisions should apply for any reporting that takes place in accordance with UK SRS.