A new legal opinion commissioned by environmental law group ClientEarth has sought to ease anxieties over liability risks related to climate transition plan disclosures.
The assessment argues that the risks directors and companies face when disclosing transition plans are overstated.
Companies and investors have expressed concern that their ability to achieve their transition plans – and the levers they will use to do so – will rely heavily on external factors, including policy developments and technological advances.
The high level of uncertainty this brings to the plans makes entities nervous about allowing them to become audited, legally binding documents, which is what is being discussed by regulators in the UK and across Europe.
“Transition plan disclosure is not a legal trap,” said co-author Andrew Thompson KC from Erskine Chambers.
“We’re not anticipating that any new forms of liability be introduced specifically to deal with any requirements,” he continued.
Existing corporate and securities law frameworks, including safe harbour provisions under the UK Companies Act, are expected to offer protection for forward-looking statements made in good faith.
Among the key findings, the opinion also states that regulatory requirements are unlikely to materially increase litigation risk, and that enhanced disclosure could, in fact, support directors in demonstrating strategic governance.
ISSB standards
The document comes less than a day after the IFRS Foundation published guidance on how transition plan disclosures should be integrated into corporate reports based on the International Sustainability Standards Board (ISSB) standards.
The IFRS Foundation took over responsibility for all the materials produced by the Transition Plan Taskforce after it was disbanded by the UK government last year.
Since then, the market has been waiting for it to integrate TPT’s recommendations – which include dedicated guidance on how asset owners and asset managers should approach transition planning – into ISSB standards.
Speaking at a ClientEarth briefing today, Vanessa Havard-Williams, former chair of the UK Transition Finance Market Review, described transition plans as “critical information for investors, lenders and underwriters” and urged the country’s government to mandate ISSB-aligned reporting.
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