From commitments to action: Understanding the regulatory landscape around transition plans

What are the latest expectations around transition planning and how can firms apply the latest frameworks?

In a time of accelerating change, planning is essential. That is why even as climate commitments evolve, there is growing pressure from stakeholders for financial institutions and corporates to develop climate transition plans. Climate transition plans were once a voluntary exercise in long-term ambition, but they are now core components of regulatory compliance, investor confidence, and business strategy.

A transition plan outlines how an organization will adapt its operations, business model, and investment decisions to align with climate goals and a changing world. At its core, a credible transition plan incorporates three pillars: ambition (clear targets aligned with climate science), action (near-term steps to meet those targets), and accountability (governance and reporting to ensure delivery).

Regulatory Momentum

The regulatory landscape for transition planning is developing quickly. The European Union’s Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose not only their emissions but also how they plan to decarbonize. These plans must be detailed, financially integrated, and subject to oversight.

The United Kingdom has played a critical role in shaping transition plan expectations. The Transition Plan Taskforce (TPT), launched at COP26, issued a comprehensive disclosure framework designed to guide corporates and financial institutions in publishing credible and consistent transition plans. In 2024, the TPT officially handed over its guidance materials to the International Sustainability Standards Board (ISSB), which is embedding the content into its global baseline for climate reporting.

At the same time, the International Transition Plan Network (ITPN) was launched to carry forward the momentum from the TPT and accelerate global adoption of credible transition planning practices. This new network includes representatives from regulators, standard setters, and financial actors working to harmonize expectations and promote best practices across jurisdictions.

Canada, Singapore, and Hong Kong are also progressing toward mandatory transition disclosures, often referencing or aligning with international standards. These developments reflect a broader global shift: transition planning is no longer optional, especially for financial actors exposed to carbon-intensive assets and systemic transition risks.

Voluntary Initiatives Play A Role Too

Alongside regulation, voluntary initiatives have been central to developing best practices.

Initiatives such as the Glasgow Financial Alliance for Net Zero (GFANZ) and the Net Zero Banking Alliance (NZBA) are pushing financial firms to go beyond disclosure and demonstrate real alignment with climate goals. Members are expected to publish transition plans that detail how lending, underwriting, and investing will shift over time, linking portfolio targets to real-world emissions reductions.

Meanwhile, central banks and supervisors in the Network for Greening the Financial System (NGFS) continue to stress the importance of transition planning as a prudential concern. Their guidance increasingly encourages integration of these plans into firms’ core risk management frameworks.

The Path Forward

For financial institutions, the message is clear: transition plans must evolve from reporting documents to dynamic, actionable strategies embedded across governance, operations, and client engagement. They are a test of credibility, not just compliance. In a world of intensifying scrutiny and rising transition risks, firms that align ambition with action and transparently report their progress will be better positioned to manage risk, attract capital, and lead in a rapidly changing economy.

Now more than ever, transition planning is not just about where a firm wants to go. It is about how it plans to get there.

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