The AMF publishes an educational guide to corporate climate change plans
In the run-up to the first publication of the transition plans required under the European Sustainability Reporting Directive (SRD), the AMF guide looks at the importance of transition plans in mitigating climate change, the importance of short- and medium-term objectives, the resources allocated and the governance of the plan.
The AMF points out that 2024 is a key year in the preparations for implementation of the CSRD, which will result in a substantial increase in the information that companies must produce on sustainability issues. Among these, the climate transition plan is of major importance to investors and stakeholders. It will enable companies to anchor long-term objectives in their strategy and ensure that they are managed with short- and medium-term horizons, consistent with the financial and strategic planning horizon. In addition to the issues of transparency, its implementation will require companies to think deeply about how their business model is evolving and whether it is compatible with the objective of limiting global warming to 1.5°C by 2100, with little or no overshoot ("1.5°C objective"), the document notes.
To help issuers in this exercise, the AMF's Climate and Sustainable Finance Commission (CCFD), chaired by Board member Robert Ophèle, has set up a working group to decipher, explain and contextualise the regulatory expectations of the Climate Standard (ESRS E1) as they relate to the climate transition plan.
Following a review of the regulations on each subject, the guide analyses investors' expectations, the practices and difficulties encountered by companies, the possibilities offered by existing methodologies and provides information to enhance the quality and relevance of sustainability reports.
Designed as an instruction manual for the transition plan as set out in the European climate reporting standards, the guide looks in particular at :
- The challenge of the report on the transition plan for mitigating climate change: this report must provide an overall understanding of the company's transformation efforts, including the involvement of governance, the evolution of the company's strategy, the identification of decarbonisation levers, the mobilisation of financing dedicated to these action plans, and monitoring of the execution of the plan;
- the importance of short- and medium-term objectives, with a sufficiently high level of ambition, given that achieving the 1.5°C objective presupposes rapid action leading to a significant reduction in greenhouse gas emissions by 2030. Various methodologies are presented in the guide to help companies on this path;
- the return of decarbonisation levers, which is at the heart of the transition plan, with the key elements being a qualitative and quantitative description of the levers and a timetable for their implementation;
- the financial and human resources allocated to the transition plan, on which the credibility of the company's decarbonisation plan depends;
- governance and monitoring of the transition plan: investors expect a high level of involvement from company management and effective incentive mechanisms, elements which are also analysed by several transition plan evaluation methodologies. The monitoring of the transition plan is also particularly scrutinised.
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