Balancing act: Are investors getting what they need from corporate clients’ transition plans?

These are some of the headline findings of new research from Lloyds Bank Corporate & Institutional, which polled 100 decision-makers at institutional investors managing at least £100m of assets. The research also involved a survey of 100 executives at large corporations with annual revenues of £100m or more.

Many investors are preparing for the next UK Government to mandate the production of transition plans by large businesses in high-emitting sectors, the results imply. This mandate was first promised by then-Chancellor Rishi Sunak in late 2021.

More than four-fifths (82%) of the investors surveyed said discussions around transition plans are now frequent in their engagements with corporates.

Moreover, almost six in ten investors believe assessing a corporation’s investment plan is an important consideration in deciding whether to back the company. And more than half (54%) believe that companies with ambitious climate targets and comprehensive transition plans will have a competitive advantage.

Investors are most likely to seek transition plans from corporates in high-emission, hard-to-abate sectors such as oil and gas, mining and manufacturing.

Transition plans go beyond emissions targets. The Transition Plan Taskforce’s (TPT) framework for creating a ‘Gold Standard’ plan also recommends that businesses disclose climate-related risks, transition-related opportunities, investment plans for low-carbon technologies and likely impacts on staff among other factors.

The Gold Standard was published last October and, earlier this year, the TPT released further sector-specific guidance.In the absence of this newer and more targeted guidance, businesses had struggled to produce robust transition plans, with most failing to assess risks and opportunities in a range of possible future scenarios.

Mismatch of ambition levels

In the Lloyds Bank Corporate & Institutional survey, around three-quarters of the corporates said they think the level of information and boldness of targets included in their transition plans aligns with investors’ expectations.

But almost six in ten investors said they think their corporate clients could be bolder if they were not scared of being accused of greenwashing – or of potentially missing emissions goals.

“Through the conversations we’re having with clients and the research we’re releasing today, it is clear there is a careful balancing act between setting realistic targets and also having ambitious plans in place to deliver a sustainable future,” said Scott Barton, Lloyds Bank Corporate & Institutional’s managing director and head of corporate coverage.

“While every organisation is different, we hope our research will shed light on the common challenges and nuances that companies face, opening up a conversation that helps to identify and unlock key enablers to strengthen transition plans with concrete actions to accelerate ambitions towards net-zero.”

Related news: Vodafone unveils climate transition plan to achieve net-zero by 2040

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