Consultation on the UK Transition Planning Taskforce Disclosure Framework

Norges Bank Investment Management (NBIM) welcomes the public consultation on the proposed Disclosure Framework and Implementation Guidance of the UK Transition Planning Taskforce (TPT), to which we responded online. 

Norges Bank Investment Management is the investment management division of the Norwegian Central Bank (Norges Bank) and is responsible for investing the Norwegian Government Pension Fund Global. We work to safeguard and build financial wealth for future generations. As a long-term, global investor, we consider our returns to be dependent on sustainable development in economic, environmental and social terms.

Climate change gives rise to transition and physical risks and opportunities for our portfolio companies. How these are managed will influence our long-term returns. We expect companies to integrate relevant climate change risks and opportunities into their corporate strategy, risk management and reporting. We support effective climate disclosure, as this enables a better understanding of companies’ exposure to climate-related risks and contributes to efficient markets and sustainable market outcomes. In particular, we expect portfolio companies to disclose a net zero transition plan to address climate change risks and opportunities, and to align their disclosures with applicable reporting standards such as the TCFD recommendations. We note that existing company disclosure often falls short of this expectation, and therefore welcome the efforts of the UK’s Transition Planning Taskforce in establishing a detailed framework for companies’ transition plan disclosures, aimed at informing future UK regulation.

In our view, transition plans should cover short-, medium- and long-term emission reduction targets for scope 1, scope 2 and material scope 3 emissions. We welcome that the TPT Disclosure Framework includes detailed disclosure on GHG emission reduction targets. However, we note that the disclosure recommendation on objectives and priorities (1.1) seems to allow an entity to exclude a relevant scope or category of emissions from its GHG reduction targets, if the entity states the reason for doing so and outlines the steps it is taking to enable target-setting for the excluded scopes. We believe that the disclosure recommendation could allow for exclusion of scope 3 from an entity’s targets in this manner, but leave no optionality for excluding scope 1 or 2 emissions since these can more readily be influenced by an entity. We also suggest that the framework refers to third party verification and science-based targets, as this information is helpful to assess the credibility of transition plans and compare them.

Companies should assess the sensitivity and resilience of their long-term profitability to different transition and physical climate scenarios, including a well below 2 degrees Celsius scenario. Building on widely accepted scenario models, companies should identify future potential climate regulations, technological developments and market conditions of relevance to their business. Companies should also be transparent in their application of climate scenario analysis, including key economic, regulatory, technological and physical assumptions. We therefore suggest that the TPT Disclosure Framework specifically refers to climate scenario analysis as a key tool for companies to assess their climate resilience, noting that this will be a requirement of the forthcoming IFRS Climate-related Disclosure Standard S2 and that the future UK framework based on TPT aims at building on the International Sustainability Standards Board (ISSB) baseline. While we acknowledge that the Technical Annex of the Implementation Guidance encourages companies to perform scenario analysis as part of their transition planning process, the disclosure recommendation on Sensitivity Analysis (2.5) could be broadened to encourage disclosure of the method of scenario analysis used by the companies, the scenarios used and scope of operations covered, as well as how the results are being interpreted and considered by the company.

We would like to reiterate the importance of the UK Transition Planning Taskforce Disclosure Framework to align and feed into other international initiatives in this space. We welcome the high degree of alignment with the TCFD and IFRS Exposure Draft S2, and the explicit intention that future UK regulation drawing on the TPT will apply and build on the baseline provided by the ISSB. International alignment and interoperability of corporate disclosure on climate transition planning is essential for multinational companies, and for global investors like NBIM who need comparable information to assess the plans of their portfolio companies. We therefore strongly encourage the TPT to cooperate with fellow standard-setters and regulators, both at the international level through IOSCO and bilaterally, in order to enhance the consistency and comparability of transition planning disclosure regimes.

We appreciate your willingness to consider our perspective, and we remain at your disposal should you wish to discuss these matters further.

Yours sincerely,

Carine Smith Ihenacho,
Chief Governance and Compliance Officer

Elisa Cencig,
Senior ESG Policy Adviser