{"id":31464,"date":"2024-01-30T00:03:06","date_gmt":"2024-01-29T23:03:06","guid":{"rendered":"https:\/\/reclaimfinance.org\/site\/?p=31464"},"modified":"2024-01-30T08:34:33","modified_gmt":"2024-01-30T07:34:33","slug":"transition-plans-robust-standards-needed-to-avoid-greenwashing","status":"publish","type":"post","link":"https:\/\/reclaimfinance.org\/site\/en\/2024\/01\/30\/transition-plans-robust-standards-needed-to-avoid-greenwashing\/","title":{"rendered":"Transition plans: robust standards needed to avoid greenwashing"},"content":{"rendered":"

30 January 2024 \u2013 As more and more companies and financial institutions are expected to adopt what are known as \u201ctransition plans\u201d in response to emerging regulations and requirements for greenhouse gas emission reductions, Reclaim Finance warns in a new report that the lack of a standardized approach risks significant greenwashing (1). The new research, which draws on analysis of 26 existing international frameworks, sets out clear expectations on the elements needed to ensure that plans are credible and identifies critical \u201cred flag\u201d warnings that indicate that a plan is not fit for purpose. Reclaim Finance underlines that transition plans must be credible and urges European regulators to ensure a robust transition plan standard and enforcement mechanism to set the bar.<\/strong><\/p>\n<\/div>

A robust transition plan must include decarbonization targets, a decarbonization strategy, an engagement strategy and reporting and governance, while also recognising risks around biodiversity and the need for a just transition, Reclaim Finance argues in its new report, which highlights the importance of transition plans for delivering climate targets.<\/p>\n

With more than 920 publicly-listed companies now setting net-zero targets (2), the report says that transition plans are an important tool to set out how these targets will be met. But without a common approach or standard, it is impossible to know whether these greenhouse gas emission reductions are adequate and will actually be delivered.<\/p>\n

Reclaim Finance argues that financial institutions, regulators and civil society need to be able to rely on transition plans to ensure climate targets are met \u2013 and that regulators need to introduce clear standards and an enforcement mechanism to ensure that this is the case.<\/p>\n

Based on analysis of existing guidance for transition planning (3), the research identifies minimum assessment criteria to allow financial institutions and others to recognise where companies are at risk of greenwashing, with red flag indicators highlighting when a transition plan is not on track (4).<\/p>\n<\/div><\/div><\/div>

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The lack of common standards and oversight for transition plans mean that anything goes, and this leaves the door wide open for companies who<\/span> are only interested in greenwashing. If we want to ensure that companies are developing credible<\/span> plans to deliver on <\/span>their <\/span>climate pledges a<\/span>nd the<\/span> fossil fuel phase-out<\/span>, the<\/span>re is a need for clear essential criteria. As a first step, we have identified a set of \u201cred flags\u201d which should sound the alarm for financial investors <\/span>when a company\u2019s plan is inadequate.<\/span><\/span><\/em><\/p>\n<\/div>

Paul Schreiber, Senior Policy Advisor at Reclaim Finance (<\/span>5<\/span>)<\/span><\/span><\/strong><\/p>\n<\/div><\/div><\/div>

For example, HSBC’s recently published \u00ab\u00a0transition strategy\u00a0\u00bb contains a number of red flags, including on-going finance for the development of coal, oil and gas production (6).<\/span><\/p>\n

With the European Union introducing new regulations requiring companies to adopt transition plans to show how they will deliver on climate goals, \u00a0Reclaim Finance argues that clear standards are critical if these plans are to deliver the necessary carbon emission reductions and transform the practices of companies (7). <\/span>\u00a0<\/span><\/p>\n<\/div><\/div><\/div>

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The integration of transition plans in reporting, due diligence and prudential rules clearly signals the European Union intends to rely on these plans to reach climate goals as well as mitigate related risks. But, so far it <\/span>has <\/span>fail<\/span>ed<\/span> to standardize the<\/span>ir<\/span> content <\/span>and to set up any enforcement mechanism. <\/span>This means<\/span> c<\/span>ompanies can <\/span>adopt purely<\/span> \u201ccosmetic\u201d transition plans that mask corporate climate inaction<\/span>, yet still comply with EU regulations<\/span>. <\/span>Clear rules on the a<\/span>doption and implementation of <\/span>credible <\/span>transition<\/span> plan<\/span>s<\/span> are urgently needed<\/span><\/span>.<\/span><\/span>
\n<\/span><\/em><\/p>\n<\/div>

Paul Schreiber, Senior Policy Advisor at Reclaim Finance<\/span><\/span>
\n<\/span><\/strong><\/p>\n<\/div><\/div><\/div>

Reclaim Finance calls on EU policymakers and supervisors to define a robust transition plan standard and enforcement mechanism, and on auditors and financial institutions to leverage its recommendations to drive companies to adopt such plans.<\/span>\u00a0<\/span><\/p>\n<\/div>

Read the report<\/span><\/a><\/div><\/div><\/div>
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Contacts:<\/h2><\/span>
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