Net Zero Transition Plans: Credibility and Action

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12/02/2024

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Many companies and financial institutions have publicly committed to achieve sustainability objectives, including net zero. Transition plans are increasingly seen as the means of planning and articulating the delivery of these commitments.

CGFI’s Leeds Innovation Hub convened an event with Nexus Leeds and the Transition Plan Taskforce to discuss the latest trends, case studies and best practice for transition planning, with a focus on the financial and food sectors. The event brought together representatives from the TPT, financial institutions, businesses, and academia. See our summary of the discussion below.

“We need to mobilise capital…we cannot transition the economy only talking to one group. You have to have conversations across sectors"

Prof Iain Clacher

Prof Iain Clacher (Leeds Innovation Hub Director, CGFI) welcomed attendees to the Hub and highlighted its missions to connect UK climate science and innovation in analytics with financial institutions. Jacques Morris (Secretariat Team Lead, Transition Plan Taskforce (TPT)) discussed the TPT’s two years of engagement with the market, financial institutions and industry on how transition plans can mobilise the transition. He discussed use cases, notably including that of investors understanding their exposure to climate risk. He noted that industry was in a pre-regulatory phase, and that now was the time for ambition, action and accountability, supported by the TPT’s framework.

How can transition plans enable the journey to net zero and climate resilience in the financial sector?

Our initial panel discussion focused on how transition plans can enable the journey to net zero and climate resilience in the financial sector, chaired by Ira Poensgen (TPT) with Paul Broadhead (Building Societies Association), Tim Manuel (Aon), and Natasha Nauth (Natwest)

Paul Broadhead highlighted the significance of decarbonising mortgages and addressing their exposure to long-term climate risks. He outlined steps for decarbonization such as discounts on energy-efficient measures and cashback incentives. He noted the need to ensure green lending was available for retrofit rather than only new, energy-efficient development.

Natasha Nauth discussed the importance of sector-specific transition plans underpinned by government targets, regulatory norms, and investment in carbon reduction efforts. This included sectors like oil, where she noted Natwest’s support for transition plans and the need to avoid greenwashing risks.

Tim Manuel noted the central role of asset owners, and the role of transition plans as a mediating tool in discussions between investors and companies, and for decision-making on behalf of beneficiaries. He emphasised the need for robust transition plan strategies for asset owners, and for approaches to tackling transition barriers such as limited emissions data outside of large, listed companies.

The panel together highlighted current transition plan challenges, opportunities and practical approaches across a range of products, clients and stakeholders, towards a better understanding of the challenges and opportunities for the net zero transition in the financial sector.

How can climate transition plans support climate resilience in the food system?

Our second panel focused on transition plans supporting climate resilience in the food system. The discussion was chaired by Jacques Morris with Camilla Riddiford (Arla Foods UK), James Hopwood (McCain Foods), Sajeev Mohankumar (FAIRR Initiative), Emma Piercy (The Food and Drink Federation) bringing perspectives from the food and beverage sector.

Emma Piercy noted the particular challenge of financing nature restoration, with a gap of £44 billion over 10 years and a need for more transition finance for farming. She also pointed out that while 70 percent of UK land is managed by farmers and landowners, farmers generate 10 percent of value chain revenues, meaning collaboration and transition planning across the full value chain is essential to drive sustainability.

Sajeev Mohankumar noted that out of 50 companies with regenerative initiatives, only 4 had any financial plans for transition. He argued that subsidies could be a barrier to new investors looking to support sustainable practices, and that an industry-wide, international approach was needed to transition the industry.

Camilla Riddiford noted the food insecurity risks associated with slim margins and farmers leaving the industry, expressing concern that more support and financial transition planning is needed for farmers. She discussed Arla’s Sustainability Incentive Model approach, and the need for larger companies to trailblaze and share sustainability best practice.

James Hopwood emphasized the importance of a long-term perspective and values of legacy and responsibility in driving sustainability. He discussed the responsibility of companies in supporting farmers in the face of climate change, inflation and cash flow challenges, and outlined current approaches such as trial farms to improve output measurement and data streams.

The panellists underscored the environmental impact of food systems – contributing toward about a third of greenhouse gases and 80% of global biodiversity loss – and emphasised the need for financial support for farming through the transition. The discussion provided valuable insights on transition-focused initiatives in the sector, including around regenerative farming, and emphasised the need for action to apply transition plans to systemic challenges.

Closing the event, Matt Scott (Executive Director, UK CGFI) emphasised the importance of strategically driving the right behaviours, rather than enabling paper decarbonisation, working collaboratively to achieve sustainability goals. He also noted the work of CGFI in supporting an ecosystem of practice around transition plans and data.