
Panoramic: Automotive and Mobility 2025
In this Second Edition of Climate Transition Focus, we reflect on the progress and the range of transition developments that have occurred so far in 2025. We highlight the key transition milestones, including the Transition Finance Council's publication of a suite of documents, IFRS Foundation guidance on transition plans and a UK government consultation on climate-related transition plan requirements. We have divided the briefing into four sections reflecting Transition Finance Council updates, key developments in transition plans, transition finance and just transition.
In this issue
Last year, we saw a focus on Net Zero transition finance and planning, including publications of frameworks and guidance to support the use of transition plans for corporations and institutions, as well as the launch of the Transition Finance Market Review (“TFMR”) and the International Transition Plan Network. We also saw publications on nature-related transition plans by the Taskforce on Nature-related Financial Disclosures and the Glasgow Financial Alliance for Net Zero (“GFANZ”). Read more on 2024 developments here.
Geopolitical events have slowed climate-related developments in 2025, particularly in relation to transition plans, though we have still seen some meaningful progress. We have also seen some major financial institutions withdrawing from GFANZ and other climate forums as well as structural changes being proposed for other climate forums.
In the EU, the future of transition plans remains uncertain as work on the omnibus simplification package continues. In the UK, the Transition Finance Council (“TFC”) has been very active, publishing a number of documents related to transition planning and finance. Policy work is ongoing, with the UK Department for Energy Security and Net Zero (“DESNZ”) launching a consultation on climate-related transition plan requirements (as part of a package of three consultations launched by the UK government).
Over the last couple of months, the TFC, co-launched by the UK government and the City of London Corporation, has published a number of discussion papers, reports and consultations. We set out some key points arising from them below.
Discussion Paper on establishing credibility and integrity in transition finance: On 27 June 2025, the TFC published Establishing Credibility and Integrity in Transition Finance. This discussion paper sets out the TFC’s initial work on establishing credibility and integrity in transition finance by defining voluntary high-level Guidelines to support the market building on the work done by the Transition Finance Market Review (“TFMR”).
Transition Finance Guidelines: On 18 August 2025, the TFC released draft Transition Finance Guidelines for consultation. The TFC is seeking feedback on detailed guidelines and interpretive guidance focused on entity-level investment in aligned/aligning entities and initial questions on an approach to entity-level investment on climate solutions and enablers. The Guidelines have been developed to address the current lack of “robust tools to assess whether entities are credibly transitioning and in a way that is financially viable”. The Guidelines explain that “[w]ithout credible assessment frameworks, both capital providers and entities risk exposure to greenwashing claims, and capital may fail to flow to where it is most urgently needed for systemic transition.” There is currently no consistent framework which would allow identification and evaluation of credible transition finance at entity-level and across asset classes. These Guidelines are intended to be the first step in developing this. The Guidelines are a voluntary framework setting out:
The Guidelines are complementary to the TPT framework and are intended to create a common minimum expectation for users to distinguish credible from non-credible transition finance. The consultation sought feedback on structure, content and usability of the Guidelines. A second consultation is expected in November 2025 focusing on engaging international stakeholders (it will be launched at COP30) and will seek feedback on the full updated Guidelines including more detailed guidelines for entity-level investment in climate solutions and enablers and whether there are any remaining gaps in existing activity-level guidance. The final updated Guidelines are expected to be published in March 2026.
Transition Finance Council: Mid-year Progress Report: On 15 September 2025, the TFC published its first progress report setting out its progress and an overview of international progress on transition finance. The report evaluates progress against each of the goals of the TFMR, including highlighting proactive engagement from regulators on transition plans and climate risk, and confirms that the UK government has decided not to proceed with the Transition Finance Lab relying on other measures such as the Net Zero Blended Finance Project, Strategic Public Investment Forum and Transition Finance Pilot to pursue its objectives.
Sector Transition Plans: The Finance Playbook: Following the Call for Evidence Scaling Transition Finance through Sectoral Transition Roadmaps in June 2025 which closed on 17 July 2025, the TFC published the Sector Transition Plans: The Finance Playbook (the “Playbook”). It offers practical guidance on integrating robust finance plans within sector transition plans and technology scale-up roadmaps to ensure that transition plans have credible financing. The Playbook provides a “sector-agnostic framework for creating credible, financeable sector transition plans”, with guidance on co-creation processes and practical steps for designing transition plans. The Playbook aligns with the Net Zero Council’s Sector Transition Plan Guidance (expected October 2025), TPT framework, TFMR and the Transition Finance Guidelines. The Playbook identifies a structural framework for a sector transition plan, elaborating on the different elements. It sets out priorities for a robust finance plan, such as mapping investment needs and financing mechanisms and key risks across solution lifecycles, understanding the diverse needs and roles of capital providers and sequencing capital flows to the phases of solution development. And concludes by considering how to ensure successful implementation of transition plans including the importance of policy clarity.
WBCSD releases A Practical Guide on Transition Plan Dependencies: On 12 September 2025, the World Business Council for Sustainable Development (“WBCSD”) published A Practical Guide on Transition Plan Dependencies. The paper recognises that every company is part of an interdependent system, relying on suppliers, industry peers policymakers, regulators and consumers. Companies need to consider what their dependencies are in the context of transition plans. The guide includes case studies and works through seven structured steps that a company may follow to integrate transition plan dependencies into its planning processes.
UK FCA confirms that summaries of transitions plans, where material, should be provided in prospectuses under new rules: On 15 July 2025, the Financial Conduct Authority (“FCA”) published its Policy Statement PS25/9 setting out the final rules to implement the Public Offers and Admission to Trading Regulations 2024 (POATRs) which replace the UK Prospectus Regulation. The FCA has introduced a definition of the types of statements that will be subject to the new liability regime for protected forward-looking statements (PFLS) and has confirmed that there will be a new climate disclosure rule for certain equity issuers and optional disclosures to improve transparency of sustainability-labelled debt instruments. Issuers subject to the new climate disclosure rule and which have published a transition plan, where the contents are material, will be expected to include a summary of the plan in the prospectus. The final rules will come into force from January 2026, subject to transitional provisions.
UK DESNZ consultation on climate-related transition plan requirements: On 25 June 2025, DESNZ opened a consultation on climate-related transition plan requirements. The consultation seeks views on how the government should take forward its manifesto commitment on climate-related transition planning. This consultation forms part of the first phase of consultations to modernise the UK’s sustainable finance framework and was published alongside two other consultations on: (i) exposure drafts of the new UK sustainability reporting standards (based on IFRS S1 and S2) – see here for details – and (ii) assurance of sustainability reporting. The consultation seeks views on the following:
In the same section, the government asks for stakeholders’ views on (i) whether impact materiality should be required in addition to financial materiality; (ii) whether the benefits of standalone transition plans outweigh the risk of duplication alongside annual reporting and (iii) streamlining financial and non-financial reporting.
The consultation seeks further views on requirements for pension funds, the benefits of mandatory versus voluntary transition plans, the extent to which nature, national Net Zero frameworks and voluntary carbon and nature markets should be considered as part of the government’s transition plan policy and whether transition plans should be aligned to net zero by 2050, whether climate adaptation should be included and whether enhanced risk planning in line with 2°C and 4°C should be supported to enhance climate resilience.
In tandem, the government is also commissioning a research project to better understand the benefits and costs of transition planning, including for private companies. Once responses have been analysed, the government will bring forward a package of proposals. The consultation paper also notes that, in the meantime, the FCA intends to consult on strengthening its transition plan expectations for listed companies, which the government encourages stakeholders to engage with. The DESNZ consultation closed on 17 September 2025.
ClientEarth publishes legal opinion on climate transition plans: On 24 June 2025, ClientEarth, an environmental law charity, published the key findings of a legal opinion it had commissioned offering clarity on legal liability for transition plan disclosures. ClientEarth reports that the legal opinion “helps to correct the narrative that transition plan disclosure is a source of heightened legal risk”. The press release giving details of the legal opinion given by barristers from Erskine Chambers concludes that:
This is particularly interesting in the context of the questions asked by DESNZ in section B.7 of the climate-related transition plan requirements consultation, which asked for thoughts about the legal implications for entities disclosing transition plans.
IFRS Foundation publishes guidance on disclosures about transition plans: On 23 June 2025, the IFRS Foundation published a guidance document on disclosure of climate-related transition information (including transition plans) in accordance with IFRS S2 and whichbuilds on the materials created by the TPT in 2024 (after which the IFRS Foundation assume3d responsibility for TPT materials). The guidance supports entities in applying IFRS S2 climate-related disclosures.
Institutional Investors Group on Climate Change publishes its Net Zero Investment Framework: Implementation Guidance for Objectives and Targets: On 21 January 2025, Institutional Investors Group on Climate Change (“IIGCC”) published its updated Net Zero Investment Framework (“NZIF”) Implementation Guidance. The NZIF provides a roadmap for setting portfolio-level objectives and asset-level targets, to support net-zero transition plans. The guidance provides guidance across a range of asset classes across the four recommended objectives and targets: portfolio decarbonisation reference objective (portfolio level), allocation to climate solutions objective (portfolio level), asset alignment target (asset level) and engagement target (asset level). This guidance is an updated version of the first NZIF target setting guidance published in 2021.
UK Financial Stability Board published a report on the Relevance of Transition Plans for Financial Stability: On 14 January 2025, the Financial Stability Board (“FSB”) published a report on The Relevance of Transition Plans for Financial Stability. The report examines the relevance of climate transition plans for financial stability assessments, in particular as a source of information for monitoring climate-related financial risks and vulnerabilities, and as a tool for helping to address some of those risks. It notes that transition plans are increasingly being used by shareholders, investors and regulators to be informed of a company’s climate strategy and approaches to net zero transition. The report notes that transition plans can address climate risks by enabling strategy setting which leads to better risk management, informing investment decisions and supporting supervisory authorities’ macro-monitoring of transition and physical risks in the financial system and the real economy.
EU omnibus simplification package and transition plans: In the EU, omnibus simplification debates rumble on, including as to whether transition plans should be required and for what size entity under the CSRD and the CSDDD. In addition, the European Commission’s proposed changes to Article 22 of the CSDDD include the removal of the language “put into effect” in relation to transition plans. This has resulted in many questions regarding how to ultimately interpret transition plan requirements if that proposal is retained in the final version of the updated CSDDD following the omnibus negotiations.
For example, on 8 May 2025, the European Central Bank (“ECB”) published its own initiative opinion welcoming the retention of the obligation to “adopt and implement clear, high-quality transition plans for climate change mitigation” in the CSDDD and emphasising that “transition plans are an essential source of information for authorities in the exercise of their competences in the fields of prudential supervision and financial stability”. However, the ECB also expressed its concern about the revision to Article 22 of the CSDDD in relation to transition plans, stating that there is a risk that the revised drafting could be “misinterpreted as meaning that undertakings are obliged to adopt transition plans but not to implement them”. Read our briefing here for more information.
On the same date, a group of legal scholars wrote to the Commission to advise against changes highlighting that (i) without mandating corporate transition plans, the states’ legal obligation to regulate corporate greenhouse gas emissions would not be met; (ii) the internal market would fragment and litigation risk would increase; and (iii) disclosure without follow through may increase companies’ liability exposure.
EU Platform on Sustainable Finance publishes a summary report on building trust in transition: On 23 January 2025, the EU Platform on Sustainable Finance (the “Platform”) published a summary report entitled Building trust in transition: core elements for assessing corporate transition plans. The report provides guidance to the European Commission on the development and assessment of corporate transition plans aligned with EU’s environmental objectives in line with the Paris Agreement. The report identifies core elements for evaluating these plans and offers recommendations to enhance the effectiveness of its policy framework. Key findings include:
The Platform sets out a number of recommendations in relation to key transition plan elements. It is worth noting here that this guidance was published prior to details of the scope of the omnibus simplification package being released in February 2025.
Network for Greening the Financial System releases paper on embedding adaption and resilience into transition plans: On 22 July 2025, the Network for Greening the Financial System (“NGFS”) released a paper on embedding adaption and resilience into transition plans. The paper aims to inform the G20 Sustainable Finance Working Group’s 2025 priorities on scaling up adaptation finance for a just climate transition. The paper discusses how transition plans should evolve from mitigation-centric tools into more comprehensive frameworks that integrate adaptation actions that are aligned with institutional and systemic resilience objectives.
The Dubai Financial Services Authority (DFSA) and United Arab Emirates Sustainable Finance Working Group (SFWG) launched a consultation on the Principles for Climate Transition Planning: On 18 June 2025, the DFSA and UAE SFWG launched the Principles for Climate Transition Planning (the “Principles”). The Principles are intended to help financial institutions to develop credible, transparent and effective climate transition plans.
UK Government published its Financial Services Growth and Competitiveness Strategy: On 15 July 2025, the UK government published its Financial Services Growth and Competitiveness Strategy, which includes details of its plans towards transitioning to Net Zero. The UK government has confirmed that its priority in the growth of the transition finance market is to seize the opportunities for UK financial services firms, and the actions the government is taking to support this growth include:
Singapore and China reconfirmed its commitment to green and transition finance: On 11 July 2025, during the third Singapore-China Green Finance Taskforce meeting, the Monetary Authority of Singapore and the People’s Bank of China reaffirmed their commitment to advance to advance cooperation in green and transition finance between Singapore and China.
UK Institute for Human Rights and Business launched database to inspire best practice for a just transition: On 11 February 2025, the UK-based think-tank the Institute for Human Rights and Business (“IHRB”) launched the JUST Stories Database initially containing 50 examples of inclusive initiatives which are advanced in implementation “and delivering impressive results” across a range of sectors.
In the run up to COP30, we expect to see much more on transition finance, particularly in the context of adaptation and resilience. Look out for our briefings setting out key takeaways from COP30 later in the year.
Our global Sustainable Finance & Investment group brings together a multidisciplinary global team that provides clients with best-in-market support. We are following developments relating to the ESG and the transition to Net Zero, so please get in touch if you would like to discuss.
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This note is intended to be a general guide to the latest ESG and climate transition developments. It does not constitute legal advice.
Authored by Bryony Widdup, Rita Hunter, and Emily Julier.