Understanding climate transition plans for ASRS compliance
Written by
Jake Atkinson, Principal Consultant, Climate
Most corporate sustainability professionals are currently focused on one major issue: the introduction of mandatory climate-related financial disclosures.
Since the International Sustainability Standards Board (ISSB) introduced its climate-related financial disclosure standard just over a year ago, economies representing over 50% of the world's GDP have commenced the introductory of mandatory climate reporting standards.
In Australia, the Australian Sustainability Reporting Standards (ASRS) have made significant progress in clarifying many elements of climate-related financial disclosures. However, uncertainties remain regarding the application and definitions of several terms within the standards. One key area of concern is the requirement for a transition plan.
What is a Transition Plan?
The phrase “transition plan” is referenced five times within the standard, four of which state the need to disclose the transition plan, with only one providing a definition:
“An aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-carbon economy, including actions such as reducing its greenhouse gas emissions.”
This definition might lead organisations to believe that the transition plan is a straightforward part of the disclosure standard. In reality, it may be one of the most complex components of a company’s climate-related financial disclosure.
Government guidance and potential pathways
Recognising the need for clarity, the Australian Government has recently published its Sustainable Finance Roadmap. The Treasury announced it will develop and publish best practice guidance for transition plans by the end of 2025.
In the same week on the other side of the world the ISSB assumed responsibility for the Transition Plan Taskforce (TPT), a UK based transition plan framework provider, which launched its framework at the end of 2023 during COP26.
This means that the TPT Framework may be used as the basis for designing the guidance, with some likely adjustments to include the Federal Governments own Net Zero Plan and sector decarbonisation pathways.
Given that the ASRS was informed by the international ISSB S2 standard, it is reasonable to assume that the upcoming Treasury guidance on transition plans will align with these standards. Since the ASRS prescribes a 1.5°C aligned scenario, the Treasury may also require that transition plans adhere to the same emissions trajectory.
There has already been some progress in connecting the ISSB S2 standard with the TPT framework. The TPT has shared a technical mapping document highlighting which components of the ISSB standard can form the foundation of an entity’s transition plan. Before the TPT, the Glasgow Financial Alliance for Net Zero (GFANZ) published its own transition planning guidance, which several financial institutions have used in their disclosures.
In summary, companies required to disclose under the ASRS are seeking guidance on drafting their transition plans, which will commence on January 1, 2025, with first reports due at the end of 2025 and into 2026.
This guidance may not come soon enough for many disclosing against the ASRS for the first time. Fortunately, the TPT and ISSB frameworks provide a basis for inferring what the upcoming guidance may include. Given the complexity and importance of transition plans, it will be essential for Group 1 reporting companies, in particular, to begin their transition planning early.
Companies that embraced the TCFD and ISSB standards early are experiencing smoother ASRS implementation. Those who look to established guidance and market practices for transition plans will reap similar benefits.
By engaging with external support, you can expect to offset compliance costs and stay ahead of this complex aspect of external disclosure.
Edge Impact has been undertaking climate risk assessments for the last 15 years across a range of sectors and industries. We have one of Australia’s largest and most experienced teams that specialise in climate risk and disclosure.
Explore our range of Mandatory Climate-Related Financial Disclosure resources
Frequently Asked Questions
What is a transition plan?
An aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-carbon economy, including actions such as reducing its greenhouse gas emissions. – ASRS
What are the steps that need to be taken to start to put together a transition plan?
Look to the existing guidance already in the market just not clearly labelled, similar to how early TCFD adopters began. We can help you make sense of this.
Do I have to publish my transition plan externally? Or is it enough to just have one?
These have to be disclosed externally and assured as part of your ASRS disclosures.
For more information contact Mark Siebentritt, our Global Practice Lead for Climate or get in touch here.
