Foreword
Dr Ben Caldecott, Co-Head, Secretariat, Transition Plan Taskforce; Director of the Oxford Sustainable Finance Group, University of Oxford; and Member, UK Climate Change Committee
Dr Caldecott also serves as the founding Director and Principal Investigator of the UK Centre for Greening Finance & Investment (CGFI), and on the Technical Council of the Science-Based Targets Initiative (SBTi).
Transition plans are not a fad; they are here to stay.
Climate transition planning, along with the disclosure of climate transition plans, is increasingly integral to corporate strategy design and execution.
With clients, employees, and other stakeholders demanding robust climate action, such planning is vital for maintaining a social licence to operate, attracting and retaining talent, and thriving in a rapidly evolving landscape of regulatory requirements.
Financial institutions are beginning to price climate-related risks, with climate risk premia increasing, further emphasising the need for credible transition plans to ensure efficient access to capital markets and financial services.
The importance of transition plans cannot be overstated, as they address non-linear and increasingly material climate-related risks and opportunities that directly impact financial performance.
A company’s transition plan serves multiple critical functions. Beyond informing investors and lenders, these plans support policymakers and regulators through a clearer picture of the decarbonisation trajectory, and the necessary steps to accelerate it. Transition plans allow supervisors and regulators to assess whether a company’s strategy is adequate given its exposure to climate- related risks. Such plans also empower stakeholders to hold companies accountable for their public climate commitments and can serve as a foundational reference for new transition finance products and instruments, such as sustainability-linked loans and bonds.
Transition planning, when done effectively, creates value not only for investors but also for various stakeholders. It ensures that companies actively address the climate crisis while simultaneously becoming more resilient to the impacts of a changing climate. The transition will be fraught with challenges, requiring companies to carefully consider what is feasible today, what can be achieved in the future, and the key dependencies that will influence their success.
The emergence of best practice transition plan frameworks and guidance, such as the materials created by Transition Plan Taskforce (TPT) that are being integrated into the International Sustainability Standards Board (ISSB), offers companies a universal template and common language for strategising, planning, and iterating their transition efforts.
This framework enables internal and external stakeholders to monitor the delivery of transition plans, understand necessary adjustments, and identify opportunities to increase ambition levels.
Translating climate ambition into real, sustained action—day after day, quarter after quarter, year after year—will not follow a linear path. Transition plans must be designed to recognise gaps, dependencies, and failures while also learning from successes and capitalising on emerging opportunities. In essence, like any robust strategy, a transition plan must be adaptable and iterative, becoming an integral part of core business strategy.
A company’s transition plan should begin with a company’s own decarbonisation efforts. Equally important for companies is to consider how to contribute proactively to achieving net zero across society.
Focusing solely on internal operations and value chains risks leading to ‘paper decarbonisation,’ where the appearance of reduced emissions does not translate into actual environmental benefits. This is especially concerning in an interconnected global system, where actions taken in isolation can have unintended negative consequences.
For instance, transferring ownership of high-carbon assets to other entities, which may be less capable of managing the associated risks or phasing out their use, can be counterproductive. In the financial sector, an exclusive focus on reducing portfolio emissions can result in “false positives,” such as divesting from companies with relatively high emissions that are nonetheless critical to the global shift to zero emissions solutions, or “false negatives,” such as investing in companies with low reported emissions that may contribute to long-term carbon lock-in.
Credible transition plans ensure investments and actions support genuine progress.
There is significant international momentum for transition plan disclosures, mandatory in the UK and soon in the European Union, through the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). Singapore intends to adopt similar measures, and the US Treasury Department recently outlined principles for net zero-aligned financing, referencing the TPT.
G7 and G20 leaders, and the UN Secretary-General, have publicly supported transition plans. Key regulators, such as the International Organization of Securities Commissions (IOSCO), the Bank for International Settlements (BIS), and the Central Banks’ and Supervisors’ Network for Greening the Financial System (NGFS), are integrating them into their supervisory frameworks.
Fortescue’s climate transition plan embodies the spirit of openness and transparency that is essential for meaningful progress. The plan is marked by high ambition and well-defined actions, underpinned by accountability mechanisms to ensure systematic delivery across the organisation. Integrated into the core of the company’s strategy, the plan acknowledges that this is an evolving journey. The transition plan demonstrates a strong commitment to iterating, improving, and adapting as necessary, while sharing insights to help the entire metals and mining sector accelerate its efforts and contribute to wider societal decarbonisation.
