IIF Authors

Status: Will be live at 05/16/2024 02:00

A spotlight on emerging approaches to bank transition planning

The past year has witnessed an evolution in the voluntary disclosure of transition plans by companies and financial institutions, amidst a complex market, policy, and geopolitical environment for the net-zero transition. As regulatory bodies and supervisors in some jurisdictions are beginning to require disclosure or development of transition plans, scrutiny of banks’ transition plans is increasing – with multiple frameworks and criteria being put forward by market-based and stakeholder initiatives. Chief among banks’ considerations in developing their transition plan for publication purposes is a consideration of whether the approach and disclosed information will align with their stakeholders’ expectations and be regarded as ‘credible’ – while also appropriately reflecting on the array of factors that may affect its achievement, and key uncertainties.

To gain greater insights on transition plan development across the global banking sector, Deloitte and the Institute of International Finance (IIF) have worked together to map out the current ‘state of play’ in this new and evolving area, through in-depth interviews with subject matter specialists from eight banks, and review of a sample of recently published transition plans. Our analysis focuses on several key questions:

  • How are banks approaching transition planning, amidst an expanding array of diverse expectations from market, official sector, and civil society stakeholders?
  • What have been the core priorities for the first round of banks’ transition plan disclosures? How are banks leveraging different frameworks and guidance?
  • How are banks using the transition plans of their clients and counterparties, and how are they evaluating the robustness and credibility of these plans?
  • How are banks working to put transition plans into action, while addressing strategic, market, and reputational considerations – including the credibility of their own plans?

Through a review and comparison of frameworks, and an analysis of bank’s approaches to the plan design and implementation process, this report contains preliminary insights on seven key considerations in bank transition planning – scientific basis and strategic positioning; consideration of climate vs. other financial performance drivers; data and metrics; targets scope and coverage; implementation activities; organizational integration and governance; and disclosure.

It is already becoming evident that developing and articulating transition plans across business areas can add value to a variety of important strategic objectives for banks. By placing climate change at the center of strategy and operations, financial firms can build a vision of the future that embraces future value creation, risk analysis, and impact.