The clean energy transition is so critical to future enterprise value that transition plans now serve as prospectuses, according to Chris Skidmore, the former minister who introduced the UK’s legal commitment to net zero.
Skidmore, who now chairs the policy working group of the Transition Finance Council (TFC), said transition plans were providing a “roadmap for the future”, by outlining to investors and other stakeholders the approaches of companies to transitioning away from fossil fuel dependency.
“Transition plans for companies are already delivering clear strategic ambitions, demonstrating how these will be implemented in reality: acting as prospectuses [by] providing the certainty and clarity that investors need to understand a company’s future direction of travel,” he told the UK Sustainable Investment and Finance Association Leadership Summit, held in London on 25 November.
The UK government is due to release policy proposals on mandatory transition planning requirements for large firms, following a consultation by the Department for Energy Security and Net Zero.
Skidmore said the economics of renewable energy made the clean energy transition inevitable, adding that the scale of finance required was a challenge and opportunity for investors across multiple sectors. While requiring an unprecedented overhaul of grid infrastructure, the Climate Change Committee’s most recent progress report estimated that decarbonising the power grid would address only 15% of UK emissions, lower than surface transport or the built environment.
“This is why transition finance, focusing on existing assets, decarbonising and reducing the emissions of sectors is so critical at this moment in time,” said Skidmore.
The TFC recently issued a Transition Finance Playbook, intended to help firms in specific sectors to execute and communicate their transitions and finance needs effectively to investors and other financial institutions.
“Business cannot act in isolation: we need entire sectors to plan their transitions, and with it plan for the finance that will be needed,” said Skidmore.
While acknowledging the need to adapt to shifting political realities, he said companies and investors needed to demonstrate leadership, rather than bemoan a lack of policy action.
“The recent conclusion of COP30 may have disappointed many with its lack of progress on a fossil fuel roadmap, yet the reality is that when it comes to the negotiated text of the Paris Agreement, there is little else to agree than to get on with the job,” said Skidmore.
“What matters now is the delivery and implementation of those agreed commitments that countries have made in their nationally determined contributions, to adopt real world solutions in real time, for which finance is critical.”
