United Kingdom unveils standards for assessing the reliability of transition finance funding

The UK Transition Finance Council, a joint initiative by the UK government, City of London Corporation, and representatives from the financial industry, regulators, and civil society, has published draft voluntary guidelines for consultation. The aim is to establish a clear and consistent framework for assessing transitioning companies in sectors like cement, shipping, and transport.

The guidelines, designed to complement existing global and domestic frameworks such as those developed by the Transition Plan Taskforce (TPT) and International Sustainability Standards Board, seek to establish a minimum benchmark of evidence to prove the strength of a company's ambition to transition to net zero. They also focus on the credibility of an entity's ambition, near-term transition planning, and progress.

Alok Sharma, the council's chair and former president of the Cop26 climate conference, stated that these guidelines are crucial for developing a UK transition finance market. He believes they will help the UK achieve its goal of becoming the global hub for raising and deploying transition finance.

However, Ellie McLaughlin, senior policy and advocacy manager at advocacy group Positive Money, has raised concerns. She states that the guidelines leave room for companies' targets and plans to be misaligned with 1.5oC pathways. Additionally, McLaughlin notes that the guidelines fail to recognize that not all companies can decarbonize, and that fossil fuel companies' business models are fundamentally incompatible with net zero, and should not be able to access transition finance.

The International Financial Reporting Standards (IFRS) Foundation has also released new transition plan guidance on disclosures relating to transition plans. This new guidance builds on materials from the Transition Plan Taskforce (TPT) to support the implementation of IFRS S2, the climate-focused sustainability standard.

The council has published the draft guidelines for consultation, with a goal of publishing a final version in 2026. The exact date of the final version publication is not specified in the available information. The council aims to use the guidelines in conjunction with available transition plan disclosures where possible to support capital providers in assessing an entity's transition.

This article was updated on 21 August 2025 to include comments from Positive Money. The debate continues on the effectiveness and implications of these guidelines in driving a net zero transition while ensuring a level playing field for all companies.