A step closer to mandatory transition plans for UK-regulated financial institutions and FTSE 100 companies

On 25 June 2025, the UK government launched a consultation on mandatory disclosure of climate transition plans for UK-regulated financial institutions (including banks, asset managers, pension funds and insurers) and FTSE 100 companies. This forms part of a wider set of measures to develop the UK’s sustainable finance framework, with the government also launching consultations on the UK Sustainability Reporting Standards (UK SRS), aligned with the International Sustainability Standards Board’s general standards, and a new proposal for a voluntary sustainability assurance registration regime, which we covered in our recent blog post. The government is committed to securing the UK’s position as the green finance capital of the world and recognises the importance of taking international developments into account when designing the new framework.

“Our plans will transform our leading financial services sector into a global hub for green investment.”

Ed Miliband, Energy Secretary

The consultation invites views on implementing transition planning requirements to realise the government’s commitment in its manifesto to mandate credible transition plans in the financial market, aligned with the 1.5^oC goal of the Paris Agreement and the UK’s domestic commitment to achieving net zero by 2050. However, the government appreciates the complexities involved with striking the right balance between legal accountability and flexibility, noting that it would not want to create undue legal risks where entities are genuinely seeking to deliver on their plans (and we briefly consider some of these legal risks in the blog post below).

Strategic and regulatory focus

As we have reported previously, transition plans are already an area of strategic focus for financial institutions and form part of the UK government’s broader growth agenda (see our coverage of the November 2025 Mansion House speech). Financial services firms have in fact been strongly encouraged to publish transition plans for some time, and many have done so. In its Supervisory Expectations, the PRA has recommended disclosure in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) standards (which include guidance on disclosing transition plan information) since 2019. The FCA has also been encouraging firms to publish transition plans ahead of mandatory requirements, with its focus being on enhancing market integrity. In 2024, the UK’s Transition Plan Taskforce (TPT) published detailed transition plan guidance for different sectors, including asset managers and banks, to supplement its finalised framework.

The FCA intends to consult separately on strengthening its expectations for listed companies’ transition plan disclosures (with reference to the TPT Disclosure Framework) as part of its broader consultation on moving from disclosure aligned with TCFD to the implementation of UK SRS for listed companies. It will also consider updating disclosure requirements for asset managers in line with UK SRS and the TPT Disclosure Framework as a next step under its Sustainability Disclosure Requirements (SDR) and investment labels regime. The PRA is currently consulting in parallel on an update to its 2019 supervisory statement (which we reported on here), proposing a similar removal of reference to the TCFD recommendations and adding reference to UK SRS instead. These developments demonstrate an aim of consistency and coherence between the government’s and the regulators’ various initiatives and consultations, alleviating potential concerns over a divergence of standards. 

Implementation options

The consultation outlines six implementation ‘building blocks’, indicating that ultimately a combination of some of those may be adopted. These aim to balance the production of reliable information with not imposing undue burden on the entities that would be subject to the transition planning requirements. In particular, feedback is sought on how to design requirements that not only protect consumers and support competition, but also encourage investment, innovation, and growth.

• Option 1: Explain Non-Disclosure. Entities that have not disclosed a transition plan or related information must explain why. 
• Option 2: Mandate Development and Disclosure. Entities must develop a transition plan and disclose related information in their annual reports, or they may be required to publish a standalone transition plan in line with the TPT’s recommendation for publishing standalone plans at least every three years.
• Option 3: Mandate Implementation. Introduce an express legal obligation on entities to deliver on elements of their plan that are under their operational control. There would need to be consideration with stakeholders of the types of accountability mechanisms that may be appropriate. The consultation makes a commitment to proportionality if this option is ultimately adopted.
• Option 4: Net Zero by 2050 Alignment. Transition plans to be aligned with the UK’s goal of achieving net zero by 2050 and set interim targets (5-10 years from the date of the plan) which are aligned with 1.5°C pathways. The government is also seeking views on useful standards and methodologies for target setting and transition planning. There is a recognition that there may be legal implications related to aligning transition plans to net zero by 2050, with views being sought as part of the consultation on the nature and extent of such implications and how legal risks may be mitigated through the design and implementation of any such requirements. If this option is taken forward, the government intends to engage with stakeholders on a proportionate approach that minimises compliance costs for businesses.
• Option 5: Climate Adaptation and Resilience: As part of this option, the government would explore how entities can be supported by transition plans in taking actions to build resilience and adapt to climate change over a longer time period, in particular with respect to risk planning for the 2°C and 4°C global warming scenarios, in line with the UK Climate Change Committee’s recommendation. This option recognises that transition planning solely focused on the 1.5°C goal may not safeguard investments and operations from the impacts of current global warming trajectories. 
• Option 6: Nature Alignment: Transition plans must address nature-related risks, an area where policy-making is less advanced than climate transition. 

Proportionality is at the heart of the consultation, particularly in relation to any potential expansion of scope beyond UK-registered financial institutions and FTSE 100 companies. 

The reality is that many financial institutions already publish a transition plan, so the real question for those institutions will be how any new mandatory requirements align with the scope of the plan already being published.

Litigation risk

We have already seen that publishing transition plans is not without risk. For example, in the Australian case of ACCR v Santos, which is the first of its kind worldwide, the claimant alleges that Santos’s representations in its Annual Report, investor day briefings and Climate Change Report that it has a clear and credible path to reducing its emissions and to achieving net zero are misleading and deceptive.  The case was heard in the Federal Court of Australia last November and a decision is awaited.  Financial institutions which currently publish a transition plan (or which intend to publish one in the future) will be interested in the way that the Australian court deals with future-looking statements in transition plans.

In the current consultation, the government acknowledges that it is trying to balance encouraging firms to take transition planning seriously (with accompanying consequences where appropriate) against having undue legal risks for firms who have genuinely attempted to deliver on their targets. 

Next steps

The consultation is open until 17 September 2025, and we can expect close cooperation between the FCA and the government in relation to any future legislation and regulatory requirements to ensure these are coordinated. Once all feedback to the consultation has been reviewed and the government has decided on the overarching approach, it is expected to consult again on the details of any future obligations. 

The government has also noted that it will consider the impact of any proposals on UK competitiveness and international alignment, including with respect to recent EU developments around simplifying requirements relating to transition plans within the Corporate Sustainability Due Diligence Directive. In particular, there is a drive to ensure the UK sustainable finance framework and capital markets remain internationally competitive.

With anti-ESG sentiment on the rise in certain parts of the world, the commitment of the UK government, the PRA and the FCA to the transition to net-zero therefore appears to remain strong, with a continuing focus on the material financial risks associated with climate change and the transition towards a net zero economy.