The concept of private sector transition plans has emerged as a crucial lever to accelerate action on climate change and the protection and restoration of nature. This position paper presents WWF’s view on key criteria and expectations that make up a credible climate and nature transition plan for financial institutions. By acknowledging and building upon existing frameworks this paper seeks to drive ambition, promote convergence on best practices, and support the adoption of robust international standards.

WWF’s key criteria and expectations for credible financial institution transition plans are summarised as follows:
 

• Ambition and Prioritization: commit to net zero in line with 1.5°C warming; set science-based (interim) targets; identify high-impact decarbonization levers or actions.
• Nature and Just Transition: commit to nature-protection and restoration goals; manage risks and opportunities of nature; capitalize on nature as a carbon sink and resilience measure; enable a “just” transition.
• Action and Implementation: adopt policies that commit to fossil fuel phase-out; scale up financing for climate and nature-based solutions; implement credible engagement strategies and escalations processes.
• Accountability and Verification: establish clear governance structures; seek third party verification; transparently report on progress and results.
• Feedback and Flexibility: embed flexibility into implementation; ensure material updates inform future iterations of plans; enact clear adjustments if there are deviations from targets.

WWF also provides a series of recommendations to financial institutions, policy makers and regulators.

Recommendations for financial institutions

1. By 2023 develop and disclose a detailed, verifiable, and actionable climate and nature transition plan that responds to the key criteria and expectations outlined above.
2. Engage clients and portfolio companies to set clear expectations to disclose credible, science-based transition plans and act on escalation processes in the event of no or insufficient action.
3. Develop products and services that respond to the needs of the real economy to broaden the suite of financing services (e.g. investment, lending, underwriting, advisory) specifically targeted at enabling the net zero, nature-positive and just transition.

Recommendations for policymakers, regulators and supervisors

1. By 2023, adopt legally binding science-based net zero and nature positive targets, translated into publicly available sector-specific transition pathways.
2. By 2024, require financial institutions and large or listed companies to develop and disclose science-based targets and credible climate and nature transition plans on a mandatory basis.
3. Introduce targeted and coherent policy measures to help facilitate near term phase out of high carbon activities, such as the development of market models to support low carbon technologies and the key inputs for those technologies.
4. Central banks, financial regulators and supervisors should utilize published transition plans to assess the transition risk profile of surveyed financial institutions and companies; for example, instigating necessary adjustments to capital or liquidity requirements.
5. Establish independent transition plan verification bodies or processes to monitor and assess transition plans.