UK’s largest public companies are lagging in this regard. Just 5 per cent of the companies have kept their climate transition plans ready, while the majority remain indifferent in this regard.
A Financial Times report says 5 per cent of the largest firms have published “credible” or sufficiently detailed information under draft British government guidance, despite most businesses saying they are committed to slashing their greenhouse gas emissions.
The British government is strictly monitoring firms' measures to curb emissions. The authorities announced their intention on making transition plans which include companies' prescribed frameworks to cut carbon emissions and the associated costs of doing so.
These measures are mandatory for all large companies, including private businesses. The government has stipulated a norm that says if companies fail to adhere to rules, they will have to justify their actions.
Research by EY indicated big firms' reluctance to comply with net zero norms. The study found that about 80 per cent of FTSE 100 companies disclosed some sort of plan that includes public targets to achieve net zero emissions by 2050, but only 5 per cent agreed to adhere to norms that are coherent with the Transition Plan Taskforce’s (TPT) draft disclosure framework.
The TPT was set up last year after the British government pledged at the UN COP26 climate summit hosted in Glasgow that UK-listed businesses would have to publish decarbonisation plans by 2023.
FT quoted Rob Doepel, EY UK and Ireland Managing Partner for Sustainability, who said the research showed that British companies need to do a huge amount of work to reach the “gold standard” required under the TPT framework.
“We have a lot of organisations that have made great pledges and statements of intent and talked about great projects, but in terms of fully aligned, fully exhaustive plans, there aren’t many that are where they need to be,” Doepel added.
Governments, regulators, and investors across the world are raising concerns about the lack of climate action by corporates. Experts are clamouring for concrete frameworks, as they are a vital tool to understand how companies will be affected by the shift to a low-carbon economy.
Under the Paris agreement, countries around the world committed to limiting global temperature rises to 2C, and ideally 1.5C, above pre-industrial levels—a target that will require a mammoth overhaul of global economies long dependent on fossil fuels.
According to Doepel, investors wanted companies to outline how their finances would be affected by the shift to net zero, believing this would enable them to compare how prepared different businesses were. But many companies were worried that public disclosure of such information would impact their access to capital.
The EY research also found that companies scored weakest against the TPT framework’s implementation requirement, which asks companies to disclose how they intend to adapt business planning and operations and change products and services.
Doepel cautioned that the COP26 target for companies to publish mandatory transition plans in 2023 would likely be missed.
He, however, said “2024 is realistic” in the wake of the autumn consultation announced last week. A global campaign, initiated by billionaire investor Chris Hohn, has advocated for shareholders to vote on a company’s transition plans, known as a “say on climate”.
Michael Hugman, director of climate finance at The Children’s Investment Fund Foundation, which was co-founded by Hohn, said: “Without credible, short-term transition plans, we cannot meet our climate goals or raise the investment needed to drive green growth and jobs.”
In February, the Local Authority Pension Fund Forum, a group made up of 86 of the UK’s public sector pension funds, asset managers CCLA and Sarasin & Partners, and the Ethos Foundation, a UK charity, wrote to FTSE 100 companies calling for the introduction of say on climate votes.