From climate ambition to financial planning: making the net zero transition a reality
The climate crisis presents unprecedented risks and opportunities, demanding business strategies that move beyond short-term profitability and which may require fundamental changes to business models.
Climate change is an economic crisis of historic scale. In response, organizations need to develop a rigorous and financially informed transition plan that is fully aligned with their corporate strategy. This is not just because they need to respond to increased regulation, but because their long-term viability depends on it.
In recent months, A4S and ICAEW have jointly held two events, LCAW2025: The role of finance in transition planning, and a roundtable on aligning transition planning and financial planning, with sustainability experts and industry leaders. Here are our four key takeaways for organizations followed by some practical top tips.
1. Make the business case for transition planning
Organizations need to see transition planning as more than a tool for staying compliant. It’s a practical way for organizations to thrive through whole-economy change, build resilience to known and unknown risks and maintain stakeholder confidence.
A challenging but crucial part of building a transition business case is thinking beyond short-term expenditure to the long-term consequences of inaction. Organizations need to think systemically, beyond the enterprise, and account for the existential risks to their business. While the data will inevitably be imperfect it is vital to include it so senior decision makers can make informed trade-offs.
“Credible transition planning is now a core element of business viability”
Richard Spencer, Director of Sustainability at ICAEW
2. Tune in to the regulatory and reporting landscape
The Transition Plan Taskforce (TPT) was initiated by the UK Government’s HM Treasury Department to encourage standardized, credible transition plans. The IFRS Foundation took responsibility for the TPT Framework and related materials in 2024 and has now published useful guidance on creating credible transition plan disclosures in line with the TPT.
The IFRS’s TPT framework and related guidance is important reading for all teams working on their own sustainability plans, and their work on connectivity is a particularly useful resource for finance professionals. This work focuses on connecting sustainability information, which is usually forward-looking, with financial information, which tends to be backward looking. Finance teams will need to consider increasingly how sustainability considerations are connected with financial information.
3. Involve the finance team
Finance teams should play a critical role in turning climate ambition into operational delivery. Involving finance teams in transition planning will bring credibility, rigour and accountability and help make sure the plan is feasible and financially grounded.
Finance professionals can model the cost of climate actions, stress-test business models using approaches like carbon pricing and scenario analysis and ensure investment decisions are aligned with the organization’s strategic and sustainability goals. Their responsibilities for allocating capital, budgeting, performance tracking and reporting can all be vital components of credible planning and effective transition delivery.
Working alongside colleagues throughout the organization, particularly in risk and sustainability teams, finance teams can ensure transition plans are grounded in financial reality and reflect what the business can afford and when.
4. Turn transition plans into action
A good transition plan must support delivery. Effective plans should address both decarbonization and resilience, and be backed by quality data. Data will help determine where an organization can make the most effective changes to support both business ambitions and achieve climate goals, considering relevant trade-offs. For example, considering data and information on anticipated financial returns, mitigation of risk, emissions reductions and resource requirements (people or financial) can inform action. This means that capital can be directed to where it’s most needed. To do this, transition planning needs to be embedded across all levels of the business, including investment planning, governance and risk frameworks.
Like any good strategic process, transition planning has to be dynamic and iterative. Teams should expect the early stages to be imperfect, perhaps even messy, but the methodologies and data quality will improve over time. It’s important to build flexible processes that track progress and can adapt over time as new data, technologies or risks emerge. But the key is to start now, as early action creates momentum and drives progress.
Top tips for smooth transition planning
Building on these wider elements, there are several practical steps organizations can take:
Build on existing systems: There’s no need to reinvent the wheel. Use your organization’s existing scenario analysis, sensitivity modelling and planning tools.
Focus on the most material areas for your business: This could include areas where significant capex or R&D is required, or product development and supply chain engagement – every organization’s transition pathway will be different.
Understand short, medium and long-term financial implications: Consider the whole lifecycle of assets and the long-term benefit of investment, not just their impact on annual budgets.
Consider climate actions through a financial planning lens: Weigh feasibility, risk exposure, stakeholder expectations and long-term value.
Improve reporting and information gathering processes: Decision makers need timely, relevant and reliable data to act with confidence.
Support cross-functional collaboration: Collaboration is key to success – finance, sustainability. risk, procurement, HR and more all have important contributions to make.
