The Transition Finance Council is consulting on draft guidelines aimed at supporting capital allocation to transitioning entities across different asset classes and jurisdictions, with a focus on financing entities that are aligning or aligned to a credible decarbonisation pathway.
The guidelines, which will be voluntary, are designed to address credibility, with 4 key principles supported by guidance on evidential factors towards each dimension of credibility. The Council says that, without a credible assessment framework, both capital providers and entities risk exposure to greenwashing claims and there is a risk that capital will not go to the places where it is most needed.
The principles, which map across from the TPT disclosure framework, are:
- credible ambition: so providers can be satisfied an entity has clear targets and implementation actions towards reducing emissions in a structured way;
- action into progress: so providers can see that the entity is reasonably capable of progressing its implementation actions;
- transparent accountability: proving that the entity’s plans are integrated into its processes and governance; and
- addressing dependencies: showing that the entity has analysed and taken account of any material dependencies when planning its actions.
The universal factors to consider should be applied consistently, in respect of each principle, and to all entities, regardless of size, geography or other context. These relate to:
- interim targets and metrics;
- implementation;
- financial viability;
- engagement;
- governance; and
- disclosure.
Finally, there are contextual factors that entities should consider where they could materially affect an entity’s ability to deliver a credible transition of its business. These relate to adaptation and resilience, publicly stated long-term targets, third-party assurance or verification, environmental and social risks, and offsetting.
The Council hopes that, by applying these factors, failure will become less common, and where issues arise it should be easier to form a credible plan to address them.
Consultation closes on 19 September, with a second consultation planned for later in the year and final guidelines in 2026.