IR Society responds on Transition Plan proposals

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The Investor Relations Society has responded to DBT, tentatively supporting mandated disclosure for listed entities on the basis it is phased, with an initial period of ‘comply or explain’ relief and/or size threshold phasing with FTSE100 brought in first. This is to help balance ambition with capacity, enable market expertise and best practice to develop (particularly around scenario analysis against extended timeframes) and help mitigate any potential impact on the perceived attractiveness of the UK market. We also strongly suggest a phased/delayed approach for 'economically significant' private entities, and additional reliefs/exemptions for any issuers where climate/transition are not considered a material risk or opportunity, and reiterate our stance that reporting entities should have the flexibility to choose between including transition plans in their entirety within the ARA, or separately.

The Investor Relations Society

Office 605 Birchin Court, 20 Birchin Lane

London EC3V 9DU

Ben Fagan-Watson

Green Finance Team

Department for Energy Security and Net Zero

3 Whitehall Place London SW1A 2AW

By email:  transitionplans@energysecurity.gov.uk

17^th September 2025

Dear Ben,

Re: UK Transition Plan Requirements Consultation

Thank you for giving us the opportunity to respond to your Consultation Paper on Climate-related transition plan requirements, and also for attending our roundtable last Friday to allow some of our Members to share their views and concerns directly with your team. This response is made on behalf of The Investor Relations Society (‘the IR Society’).

The IR Society represents Members working for publicly listed companies and investor relations focused service providers, to assist them in the development of effective two-way communication with the markets. It has approaching 800 Members, drawn mainly from the UK, including the majority of the UK FTSE 100, many of the FTSE 250 constituents and some from AIM-listed companies, as well as those listed overseas.

The IR Society’s mission is to promote best practice in investor relations; to support the professional development of its Members; to represent their views to regulatory bodies, the investment community and Government; and to act as a forum for issuers and the investment community. 

Our response has therefore been primarily constructed through the lens of a corporate issuer, and as such reflects the views of those very much at the ‘coal face’ of investor engagement and corporate reporting – both financial and non-financial.

We set out below our general comments on those aspects of most relevance to our Members.

Whether, and how, to mandate transition plan disclosure (Q10, Q11 & Q24)

Mandated or 'comply or explain' approach

On the question of whether transition plan disclosure should be mandated or follow a 'comply or explain' approach, we note the view that mandatory disclosures should improve comparability and enhance accountability to stakeholders, in turn driving internal investment and board attention. Investors might also be able to make better informed capital allocation decisions and support the UK’s transition to net zero.

However, we believe that there are significant risks to these goals through mandatory disclosures, especially the introduction of further technical reporting complexity for issuers.  Many corporates are already facing significant changes in the corporate reporting landscape, both in the UK and internationally, and are increasingly resource constrained.

It is in that context that we urge the government to consider the potential negative impacts of mandatory disclosure on ‘UK plc’ competitiveness, particularly in the context of creating, developing and listing businesses in the UK (compared to other parts of the global economy). Regulatory complexity and mandated reporting requirements are a clear disincentive for a UK listing and risks the stated goal of reducing the reporting burden by 25%.  Specifically, the impact on small and medium sized issuers we believe need to be carefully considered (see comments on ‘scope’ and ‘phasing’ below).

Current disclosure levels

In 2023, over 70% of FTSE 100 companies were already voluntarily undertaking some form of transition planning, according to CDP.  More recent research indicated that 82% of FTSE 100 companies disclosed information on their transition plan in their FY2024 annual report (Black Sun’s Complete 100 research, published in July 2025).  TCFD also encourages disclosure of a transition plan where a company has developed one and the proposed UKSRS S2 also includes an expectation that companies that have developed a plan should disclose it.

We are aware that DESNZ is commissioning research to better understand the reasons why companies decide against such disclosure (including among unlisted companies). From the IR Society’s perspective, our Members have told us that there are a number of barriers to disclosing a transition plan, which would include:

• board and management reluctance due to legal and forward-looking uncertainties over such long time periods,
• the lack of standardised cost calculation methods (unlike financial reporting) making modelling a significant challenge,
• the cost of developing a plan (given some of the disclosures are so technical),
• staff and resourcing limitations – including the expertise to undertake such long term forecasting,
• limited investor pressure to disclose a transition plan (for example, where climate is not considered material to a particular issuer or sector), and
• multinational considerations, given varying international attitudes toward ‘ESG’ topics, meaning that in some circumstances disclosing a transition plan may actually restrict access to investment.

On balance, we could see a greater argument for mandatory transition plan disclosure on the basis that the scope is restricted and there is a phased approach (see below), to help balance ambition with capacity. Achieving greater simplicity and rationalisation of differing reporting requirements would also help support this rationale, as corporates are currently pulled in many reporting directions.

Scope and phasing

In our view, any mandatory disclosure requirement should eventually apply to all listed entities, implemented via a phased approach. This phasing could comprise:

• using a comply or explain relief during an initial period, which might support companies less experienced with transition plan reporting to learn from more ‘mature’ reporters, and/or
• phasing size thresholds, with large listed businesses (ie FTSE 100) brought within scope first as they are more likely to have the resources necessary for the sophisticated modelling techniques needed to support this reporting, coupled with some specific guidance/case studies for smaller listed companies to help them as and when they are brought into scope, and enable smaller-caps to benefit from the development of market expertise and best practice.  
  This will be particularly important in relation to the proposed UK SRS S2 when that applies where, although there is no transition plan requirement per se, if a company has a transition plan, it is expected to disclose it.

Such phasing could also help mitigate the impact of mandating transition plan disclosure on the perceived attractiveness/competitiveness of the UK market.

We would also strongly encourage consideration of a phased approach in respect of certain categories where development of best practice within the larger listed entities would help guide disclosure and broaden the level of market expertise.  This is particularly relevant to the requirement for scenario analysis against extended timeframes.   These categories could include:

• private entities: delayed implementation for 'economically significant' private entities, where they have been brought into scope for CfD disclosures and a Non-financial and Sustainability Information Statement (NFSIS). 
  
  We have supported in a separate consultation the requirement for economically significant private entities to report against UK SRS, and in our response we have supported this on the basis that it would help address market dependencies by supporting transparency across value chains, particularly where listed companies rely on private suppliers for value chain analysis and Scope 3 data.

• Non-material: reliefs/exemptions for issuers where climate is not considered material.

• Transition non-material risk: additional reliefs/exemptions for issuers where climate transition is not considered a material risk or opportunity under their S1 materiality assessment, as they would have no requirement for reporting under S2 as transition planning is not a material issue to their business. In these circumstances, in our view, it would not be proportionate to require disclosure of a transition plan.

Location of reporting

The consultation seeks views on the advantages and disadvantages of mandating entities to publish a standalone transition plan document, distinct from mandating entities to develop a transition plan and disclose any transition plan-related information as part of their annual reports.

We believe reporting entities should be given the flexibility to choose between including transition plans in their entirety within the Annual Report and Accounts (‘ARA’), which may suit many smaller reporting entities, or separately. This may include separate sustainability/ESG reports, climate reports or as separate standalone reports, where greater detail can be included than might be possible within the ARA.

Standalone: For some, a standalone version of an entity’s transition plan may also help a preparer to communicate more clearly the nuances of its strategy, improving the ability of external audiences to understand how the entity is managing the complexities of the transition. This could be important given companies are keen to manage the volume of disclosures in the ARA, especially given the long-term time horizons inevitably involved with a transition plan.

This view is taken on the basis that we would expect any financially material information is also included in the ARA, which would remain the single source for all material disclosures. A flexible approach would help corporates ensure that the ARA remains a cohesive and comprehensive document, whilst allowing companies to publish more detailed plans without further expanding their ARA.

Integrated: We believe corporates are best able to judge the advantages of integrated vs standalone reports, and with the advent of technologies which are highly proficient at extraction and analysis, an integrated route is not a barrier to clarity or comparison.  Especially where transition plans are relatively simple, there should not be an additional burden imposed on a corporate for a separate report.  This is equally the case for those corporates where transition plans are integral to business strategy, relevant disclosures should be included throughout the ARA rather than in an entirely separate section, with appropriate signposting.

Issues/concerns associated with mandating implementation of transition plans

We see significant challenges to mandating implementation of transition plans (if current market mechanisms and investor pressure are not sufficient to encourage companies to meet their targets); raising complex and undesirable issues of enforceability, legal risk, market dynamics, investor protection and competition law concerns.

Delivery on published plans and promises (such as growth targets, product launches, cost reductions, or strategic initiatives) is closely monitored by investors and any failures will influence investor confidence and share price performance, and in our view implementation of transition planning need not be treated differently.

We would therefore recommend encouraging high-level updates, such as material changes in a plan, rather than seeking to mandate implementation or specific disclosure. 

Climate adaptation 

Climate adaptation is often underweighted but is nevertheless potentially material to long-term risk and asset valuation. However, rather than mandating this disclosure in the legislation, we would advocate a guidance-based approach to integrating climate adaptation and physical risk considerations into transition planning as this would allow for flexibility. This would also align with evolving investor expectations.

CSRD alignment

Strong alignment with CSRD transition planning requirements (including Article 19a(2)(f) of the Accounting Directive) is essential to reduce dual compliance burdens. Where full alignment is not possible, a UK-specific interoperability guide or mapping summary could help bridge the gap.  The reporting impact of misalignment should not be underestimated for corporates caught under both regimes.

Opportunities for simplification (Q12)

Opportunities for simplification include consolidating current requirements and rationalising thresholds related to the NFSIS, SECR and TCFD; reducing duplication and improving clarity and cohesive storytelling; and interoperability with S2 and CSRD to minimise dual reporting burdens and support UK market competitiveness.

As part of the review of non-financial reporting, we would strongly encourage a holistic review of all UK climate-related reporting requirements, given the current differing size thresholds between SECR, TCFD, Transition Plans, ISSB/UK SRS etc.  From a corporate perspective this could greatly reduce complexity and partial/non-useful disclosures, with the ideal being a harmonisation or even consolidation of the different requirements, especially where this would provide greater clarity.

Governance

We would support strengthening expectations around board-level accountability, oversight processes, and proportionate linkages to executive remuneration, which could help underpin the credibility of reported transition plans (eg Paragraphs 5-7 of UK SRS S2 on governance processes, controls and monitoring climate-related risks and targets, including how climate-related considerations are factored into executive remuneration (and see para 29(g)).   

Guidance could encourage companies to disclose the maturity of their transition planning processes and how they intend to enhance governance, data, and scenario coverage over time to support any future assurance processes.

Liability (Q27 and Q28)

Section 463 of the Companies Act 2006 contains protective provisions for forward-looking information in the Strategic Report and Directors’ Report, with directors only liable where they either “knew the statement to be untrue or misleading or was reckless” or knew that the omission was a “dishonest concealment of a material fact”.

Reporting on transition plans will also include forward-looking information and, in our view, it would be highly beneficial for similar ‘safe harbour’ protection to apply to transition plan disclosures, particularly forward-looking elements and dependencies on third parties or policy assumptions, to avoid deterring transparency or decision-useful disclosures.

We hope you find these comments useful. Please do not hesitate to make contact if you have any questions.

Yours sincerely,

Liz Cole

Head of Policy and Communications, The Investor Relations Society

(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)

Ross Hawley

Co-Chair of the Policy Committee, The Investor Relations Society

(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)

Published 17 September, 2025