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Only 5% of the FTSE 100 have credible decarbonization plans: EY

Despite a UK government pledge to require large listed companies to disclose decarbonization plans this year, and over 80% of FTSE 100 companies committing to net zero by 2050, 95% of these companies have yet to publish "credible" or sufficiently detailed plans, according to a new study by professional services firm EY.

The UK initially committed to introducing mandatory disclosure of transition plans from financial institutions and listed companies during the COP26 conference in 2021, with reporting expected to begin in 2023, and subsequently formed a Transition Plan Taskforce (TPT) comprised of industry and academic leaders, regulators, and civil society groups to develop a "gold standard" for transition plan disclosure.

The TPT released its draught framework in November 2022 and intends to publish it, along with implementation guidelines for transition plans, in the summer of 2023. Following the expected release, the government committed to consulting on the implementation of requirements for climate transition plan disclosure in late 2023.

However, according to its analysis of net zero transition material released publicly by FTSE 100 companies as of January 31, 2023, only 5% have revealed plans that satisfy the draught TPT Framework guidance and have begun putting the plans into action.

EY UK&I Managing Partner for Sustainability, Rob Doepel, stated:

"Businesses should now be clear about what credible, detailed plans should look like, and they should have a good idea about the direction regulation is taking." There is no excuse for being unprepared, and the UK's biggest businesses must move forward with creating detailed, actionable plans that will allow their organisations to transition and enjoy the benefits of Net Zero."

The study discovered the strongest performance by FTSE 100 companies on the "Foundation" stage, which includes describing the plan's objectives, priorities, interim targets and milestones, and a summary of how the business will embed the strategic ambition of its transition plan.

The "Implementation Strategy" stage was the weakest for the FTSE 100 companies, with only 11% publishing some of the required elements, which include more detailed disclosure of short-, medium-, and long-term actions to deliver on the transition plan, planned changes to products and services, internal policies to align strategy with the plan, a description of the financial implications of the planned strategic changes, and the sensitivity analysis.

Even among the 5% who were judged to have given adequately detailed plans, the study discovered gaps in areas such as financial planning and the definition of financial metrics and targets, suggesting that more work is needed to be considered fully TPT-aligned.

Doepel added:

"While the government has previously stated that listed companies will be expected to publish their transition plans this year, no final date has been announced." Setting a deadline would provide much-needed certainty to the UK's largest businesses and convey a clear statement that inaction is not an option."

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