| Summary: |
Net zero transition plans are set to become a key part of the pathway to implementing the Paris Agreement. Just as governments need detailed plans to show how they will deliver their net zero targets, corporations and financial institutions need to inform stakeholders how they plan to adapt their business model to a rapidly changing environment and mitigate transition risks. Transition plans have largely been treated as a tool for non-financial disclosure to date, but there is ample scope to make more use of transition plans for prudential purposes. This report discusses how prudential supervisors could use prudential transition plans as an additional dynamic instrument to assess, address and bring distant financial risks into the present. It outlines steps, in the form of a Supervisory Playbook, towards incorporating transition plans into prudential supervision. This could enable supervisors to effectively use the benefits of transition plans as a forward-looking methodology to better manage and overcome some of the challenges associated with climate risks. |
