Understanding Climate-Related Transition Planning: A Guide for Accountants

CA ANZ, in collaboration with Monash University’s Climateworks Centre have published the understanding climate-related transition planning information guide which provides essential insights into the importance of climate-related transition planning and the role accountants play in this process.

What is a Climate-Related Transition Plan?

A climate-related transition plan is a strategic, forward-looking document that outlines how an entity plans to achieve its net zero greenhouse gas (GHG) emissions reduction targets. According to the Australian Accounting Standards Board (AASB) S2, it includes the entity’s targets, actions, and resources for transitioning towards a lower-carbon economy. These plans are not just about reducing emissions but also about integrating climate strategies into the entity’s overall business strategy, ensuring accountability, and building trust with stakeholders.

Why Transition Planning Matters for Accountants

Accountants play a critical role in identifying, managing, and disclosing these risks. Effective transition plans help mitigate both physical and transition risks, providing a clear roadmap for achieving net zero targets.

In Australia, under AASB S2, reporting entities, who have climate-related transition plans, are required to disclose the information about key assumptions used in developing its transition plan, and dependencies on which the entity’s transition plan relies.

In New Zealand mandatory climate-related disclosures, which commenced on 1 January 2023, requires a climate reporting entity (CRE) to have a transition plan and include elements from the plan into annual disclosures. The External Reporting Board (XRB) has published transition planning disclosures guidance which covers all elements relating to transition planning disclosures.

Ensuring Credibility in Transition Plans

Not all transition plans are created equal. Credible plans must include science-based net zero targets, specific and measurable decarbonization actions, and a clear governance structure. They should also integrate the transition strategy within the wider organisational strategy, including financial planning.

To continue the conversation with other Chartered Accountants and read CA ANZ’s weekly update – Sustainabites – join the Climate and Sustainability group on My CA (member login required).

If you have suggestions for more questions, responses or just a different perspective please let us know at [email protected].