Climate Transition Plans continuous journey and theories of change

Since we last posted in November 2023 about the work we contributed to for HM Treasury’s Transition Plan Taskforce (TPT) lots has happened in the space, with the TPT publishing its final guidance and transition plan resources.

We were delighted to see our request for alternative investments including private markets into the scope of the final guidelines. These asset classes are increasingly important in investors’ portfolios but also represent climate transition and adaptation opportunities. Equally our interest in pursuing the integration of social considerations into climate action was satisfied by the explicit inclusion of just transition in various guidelines.

We have also been very supportive of the way that these guidelines can be used by companies with complex structures – for instance a financial services company that includes an asset owner and an asset manager (such as Royal London) to promote consistency in the guidance and the objectives pursued.

Since last November, we also identified additional improvements in the inclusion of investment consultants and the disclosure of a firm’s ‘Theory of Change’ – which sets out how investment activities or products are expected to contribute to a positive impact. The latter is also featured in the FCA’s Handbook and Sustainability Disclosure and Labelling Requirements. We were strong advocates for inclusion of Theory of Change in the context of a transition plan, we found that without this inclusion, there is a disconnect between an investor’s plans and the intention underpinning its actions. The inclusion of an investor’s Theory of Change in its climate transition plan is likely to support the context for the disclosure of its outcome rationale or expectations for its selected actions, policies and any trade-offs.

This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.