DESNZ consultation on transition plan requirements

We refer to the invitation to comment on the Department for Energy Security and Net Zero’s consultation on transition plan requirements. We appreciate the opportunity to contribute our investor perspective on the possible implementation routes for transition plan requirements in the UK.

Norges Bank Investment Management (NBIM) is the investment management division of the Norwegian Central Bank and is responsible for investing the Norwegian Government Pension Fund Global (the fund). NBIM is a globally diversified investment manager with 19,754 billion Norwegian Kroner at end 2024, of which 1,137 billion (ca GBP 80 billion) invested in the United Kingdom. As a long-term investor, we consider our returns over time to be dependent on sustainable economic, environmental and social development, as well as on well-functioning, legitimate and efficient markets.

As a diversified and long-term investor, we are highly exposed to financial risks stemming from climate change. We have therefore included this topic in our responsible investing strategy over a decade ago, first through climate change expectations addressed at portfolio companies and then through a dedicated Climate Action Plan in 2022. Our strategy is to address climate risk and opportunities at the market, portfolio and company level. At the market level, we have supported the development of strong reporting frameworks for corporate climate risk disclosures. Better information from companies enables better investment decisions, more informed company engagements and tailored voting decisions. In particular, we have long encouraged regulators and standard setters to set mandatory requirements for climate-related disclosure, focusing first on the TCFD recommendations and on the IFRS S2 climate standard since 2023. We have also engaged in standard setting efforts related to transition planning, notably the UK Transition Plan Taskforce.

At the company level, the core of our work is to support companies in setting science-based targets and transition plans. We set out our approach to owning companies through the climate transition and engaging them on net zero targets, transition plans and emission reductions in our Climate Action Plan. We further clarified our expectations of companies on climate change in 2024, significantly strengthening our expectations on transition plans. In particular, we set as a core expectation that companies should implement time-bound and quantified transition plans, designed to deliver on their interim emission reduction targets, and annually disclose progress against pre-established and consistent KPIs[1].

We believe that the Transition Plan Taskforce (TPT) “gold standard” disclosure recommendations are very helpful for entities which are at an advanced stage of their transition planning journey, however they are overly granular to be embedded into a mandatory disclosure framework for a broad scope of entities at this stage. Therefore, the TPT materials should be used as a source of guidance and best practice, but we believe that mandatory TPT-aligned transition plan disclosures are not necessary if IFRS S2 and the transition plan related IFRS guidance are properly applied. More broadly, we believe that a specific obligation to develop a standalone transition plan might not be necessary, as entities will in future have to disclose transition plan-related information as part of their annual reporting, once SRS S2 is mandated. We do, however, strongly support mandatory disclosure of the most decision-useful elements of transition plans, which include decarbonisation levers and financial implications. Our own expectations on climate change, targeted at our portfolio companies, do not explicitly require companies to publish a standalone transition plan document, but rather focus on implementation and disclosure of specific decarbonization actions, integration of transition planning into broader strategy and business planning, and annual progress reporting.

We thank you for considering our perspective and remain at your disposal should you wish to discuss these matters further.

Yours sincerely,

Carine Smith Ihenacho
Head of Policy Engagement

Elisa Cencig
Chief Governance and Compliance Officer

[1] Climate change