The UK is increasingly focusing on climate-related transition planning as a way to drive real economy decarbonisation while maintaining global competitiveness. In November 2024, the government announced its commitment to require UK-regulated financial institutions and FTSE 100 companies to develop credible transition plans aligned with the 1.5°C goal of the Paris Agreement.
This approach reflects a shift in policy priorities: rather than pursuing a UK Green Taxonomy, the Chancellor emphasised focusing on policies that “matter most” and channeling investment into the transition. Transition plans are seen as a practical tool to provide investors, regulators, and the wider market with clear, decision-useful information on how companies intend to manage their net zero journey.
The UK government launched a consultation on 25 June 2025, seeking views on options to take forward climate-related transition plan requirements. Published by the Department for Energy Security and Net Zero, the consultation is open for 12 weeks until 17 September 2025. This follows the government’s November 2024 announcement that it would consult in the first half of 2025 on the future of its transition plans policy.
The government has committed to mandating UK-regulated financial institutions—including banks, asset managers, pension funds, and insurers—as well as FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement. The consultation then sets out 33 questions and seeks evidence on how best to provide the market with credible and decision-useful information through transition plan requirements.
Specifically, the consultation explores the benefits and use cases of transition plans, the implementation of transition plan requirements and related policy and frameworks.
The purpose of this exercise is to gather views that will inform the government’s next steps in designing a robust framework for transition plan disclosure. By doing so, the UK aims to ensure that transition planning drives real-economy decarbonisation while supporting its global competitiveness and leadership in sustainable finance.
WeeFin strongly supports the mandatory development and disclosure of transition plans (Option 2) for both corporate and financial entities. Mandatory requirements ensure broad market coverage, preventing reporting from being limited to voluntary early adopters, and fostering comparability across companies and sectors.
This approach strengthens transparency, allowing investors, regulators, and stakeholders to evaluate whether strategies are credible, ambitious, and financially viable. While implementing mandatory plans involves reporting burdens, WeeFin highlights that phased disclosure, proportionality based on company size and sector, and capacity-building measures can mitigate these challenges.
Ultimately, mandatory transition plans are viewed as the most effective way to drive systemic change, reduce greenwashing, and consolidate the UK’s position as a pioneer in transition finance.
Transition plans are central for financial institutions to measure and manage physical and transition risks across their portfolios. WeeFin emphasises that insurers and pension funds, in particular, rely on evaluating investee transition plans for financial stability and risk assessment.
Transition plans provide a methodological framework that increases transparency, supports ESG scoring, informs engagement strategies, enables exclusions, and tracks controversies related to climate and greenwashing.
By systematically assessing corporate plans, financial actors can channel investments toward credible “Improvers” funds and other transitional products, enhancing investor confidence. This approach also ensures that financial institutions allocate capital in line with climate objectives and avoid reputational and financial risks associated with superficial or inconsistent reporting.
WeeFin stresses that transition plans should be designed to maintain coherence with key international frameworks, including TCFD, ISSB (IFRS S1 & S2), CSRD/ESRS, and the UK SDR. Harmonising definitions, metrics (such as GHG emissions across scopes 1–3), and scenario assumptions (2°C and 4°C pathways) reduces regulatory fragmentation and supports comparability across jurisdictions.
Transition plans should also integrate existing market practices like the Net Zero Investment Framework (NZIF) and sector-specific guidance, ensuring alignment with investor expectations and international climate commitments. Aligning UK requirements with these frameworks helps prevent duplication, enhances credibility, and positions the UK as a global leader while maintaining investor confidence and market efficiency.
WeeFin advocates an “obligation of means” rather than a strict results-based mandate for transition plans. While companies and financial institutions should implement ambitious strategies, a strict compliance requirement with legal penalties could unintentionally reduce ambition.
A balanced approach recognises the complexity of transition planning, the reliance on fossil fuels, global inequalities, and methodological uncertainties. Practical measures include phased implementation, proportionality thresholds by company size and sector, integration with existing reporting requirements and clear guidance or templates to support compliance. This approach encourages ambition while accommodating real-world constraints, ensuring that transition plans are both meaningful and actionable.
Moreover, if mandatory disclosure is introduced, it should first apply to corporate entities; otherwise, it will not be effective. Currently, the reporting burden for these companies is largely carried by investors, who assess transition plans during shareholder engagement or before granting financing or insurance. Government support could help reduce this burden and facilitate compliance.
WeeFin emphasises the importance of integrating climate adaptation, resilience, and nature-related considerations into transition plans. Adaptation measures reduce exposure to physical climate risks, while nature-positive actions address biodiversity loss and ecosystem degradation. Existing frameworks like TNFD and SBTN provide practical starting points, and a phased approach allows financial institutions to progressively incorporate more sophisticated assessments, including geospatial analysis and sector-specific metrics.
For companies operating internationally, transition plans should consider disparities between developed and emerging markets, prioritising material emissions and risks, while leveraging technological tools and proxy methodologies to address data limitations. This ensures transition plans are not only climate-focused but also ecologically responsible and globally applicable, supporting both domestic net zero objectives and sustainable investment in EMDEs.
The UK consultation on transition plans represents a key step in structuring and strengthening sustainable finance. Mandatory transition plans appear as a strategic lever to enhance transparency, comparability, and credibility of corporate and financial actors’ climate commitments. Combined with tailored support mechanisms — such as sectoral guidance, standardised templates, training, and technological tools — this approach balances ambition with realism, while minimising risks of greenwashing or superficial reporting.
Integrating international frameworks, including ISSB standards, TCFD, CSRD, and market best practices, is crucial to avoid regulatory fragmentation and ensure alignment with global transition objectives. Considering sector-specific characteristics, supply chains, and the economic contexts of emerging markets ensures that the transition is proportional, effective, and inclusive.
Finally, transition plans should go beyond climate mitigation to incorporate physical risk adaptation and nature preservation, following progressive and measurable pathways. This holistic approach strengthens both corporate and financial system resilience while supporting a fair and sustainable transition across the economy.
The UK has the opportunity to become a true global pioneer in transition finance, creating a robust, coherent, and progressive regulatory framework capable of guiding economic actors toward a low-carbon, environmentally responsible future.
To read our full response to the consultation, click here.
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