On 25 June 2025, the UK government launched a consultation on introducing climate-related transition plan requirements for UK-regulated financial institutions and FTSE 100 companies. The consultation, which was published during London Climate Action Week 2025, reflects the government's manifesto commitment and takes forward recommendations from the 2024 Transition Finance Market Review.
Why prepare transition plans?
Although several FTSE 100 companies already produce some form of transition planning, this is done voluntarily. In the first section of the consultation paper, the government reviews the benefits of transition plans and planning and the main use cases. The government sees transition plans as critical to securing the UK's position as the green finance capital of the world and a valuable tool to improve corporate transparency and to support global efforts to tackle the climate change and nature crisis.
Credible transition plans
The core aim of the government's proposals is to ensure that in-scope entities develop and disclose credible transition plans aligned with the 1.5°C goal of the 2015 Paris Agreement and the government's commitment to a net zero economy by 2050.
Scope
The government is considering extending the proposed requirements beyond UK-regulated financial institutions (including banks, asset managers, pension funds, and insurers) and FTSE 100 companies to other economically significant entities. Small and medium-sized companies are not currently envisaged to be in scope. However they may be indirectly impacted given their critical role in the overall supply chain.
Design of transition plans
The government seeks views on the use of the Transition Plan Taskforce disclosure framework and the draft UK sustainabililty reporting standards (UK SRS) in preparing transition plans.
Building a proportionate regime
While the government acknowledges that 'climate action must be accelerated drastically,' it is striving to develop a regime for transition planning which encourages growth and does not create unnecessary burdens. To this end, it is proposing a range of options including a 'comply or explain' option (producing separate transition plans would be a voluntary requirement but where companies have not published a plan, they would be required to explain why they have not done so), a mandatory transition plan regime, and a mandatory implementation regime.
The government also recognises that a mandatory requirement to produce transition plans that are aligned to net zero by 2050 may create a compliance burden on businesses and have cost implications. Its proposals therefore consider the role of interim targets, guidance on international operations and investments, and the flexibility that may be provided by a 'best efforts' or 'reasonable efforts' approach.
Climate adaptation, resilience, and nature alignment
The government is also seeking views on incorporating climate adaptation and resilience, as well as nature-related considerations, into transition planning. In particular, it is exploring the use of 2°C and 4°C global warming scenarios for risk planning and considering the integration of nature transition disclosure frameworks, such as those developed by the Taskforce on Nature-Related Financial Disclosures (TNFD).
Related policies and frameworks in the UK and beyond
The government is coordinating its transition planning policy with national net zero frameworks, principles guiding voluntary carbon and nature markets, and international developments (including the EU's Omnibus package that proposes simplifying sustainability reporting requirements for large companies and financial institutions and includes proposals that seek to simplify the EU's transition plan implementation and disclosure requirements).
Legal risk and liability
The government acknowledges concerns about legal risks associated with transition plan disclosures, particularly where forward-looking information or third-party data is involved and would welcome stakeholder input on the degree of legal risk involved in the publication of voluntary or mandatory transition plan-related information.
In addition, the government has requested feedback on the UK's wider legal framework for company disclosure. It notes that section 463 of the Companies Act 2006 provides some protection for directors relating to reporting made with the best available information and in good faith. The government is considering whether similar protections should apply to reporting under UK SRS.
Guidance and support
The government is committed to supporting organisations in developing, disclosing, and implementing transition plans. The consultation seeks feedback on the guidance, support, and capacity building needed to facilitate effective transition planning. To inform its approach, the government would like to understand from entities that have developed transition plans what they found useful and from those companies that have not developed or published transition plans, what barriers they may have encountered.
Future consultations
The government is deferring the consultation on potential accountability mechanisms for any future requirements and the implications of disclosing commercially sensitive information to a future consultation once it has confirmed its preferred approach.
Linked consultations
The consultation is part of a phased approach to modernising the UK’s framework for corporate reporting related to sustainability information. Alongside its consultation on transition plans, it has published consultations on:
Next steps
All three consultations close for comments on 17 September 2025. The government will consider the feedback to the transition planning consultation together with the UK SRS and sustainability assurance consultations and put forward a package of proposals that considers the UK regulatory landscape as a whole.
It is working closely with the Financial Conduct Authority (FCA) and the Financial Reporting Council to ensure future requirements are implemented in a co-ordinated way, and that the international competitiveness of the UK's capital markets is promoted.
The FCA is expected to consult in due course on strengthening its transition plan expectations for listed companies.
