Responding to the increasing pressure on organisations from investors, stakeholders and standard-setters, Accounting for Sustainability (A4S) and ICAEW have produced a document on aligning financial and transition planning: Aligning Transition Planning and Financial Planning: Key Questions for Finance Teams.

There are two ways to go about aligning transition planning and financial planning, states the guidance: through a separate, fully costed transition plan, or by embedding transition planning within the wider business strategy.

“Limited progress has been made to date on the aligning transition planning and financial planning,” says Natalie Jackson, the report’s author and consultant with the Knowledge and Technical team at A4S. “In 2023, CDP (Carbon Disclosure Project) analysed more than 23,000 organisations and found that only five percent had disclosed how climate-related risks and opportunities had influenced their financial planning. The CDP Corporate Health Check 2025 found ‘just 9% of companies reported to have aligned at least 5% of their capital expenditure with their climate transition plan’.”

Standards such as IFRS S2, ESRS E1 and the GRI Standards, as well as the Transition Plan Taskforce’s Disclosure Framework and the CDP questionnaire, either explicitly reference or imply the disclosure of financial planning associated with transition planning. Jackson also points out several benefits to alignment, including: 

• Increasing the likelihood of achieving net-zero targets – through a greater understanding of the potential financial implications of the actions required to deliver targets.
• Making a business more resilient – via an increased ability to estimate whether the business will be profitable in a net zero world and respond to climate-related risks.
• Understanding potential funding requirements – through an evaluation of whether additional funding is required to deliver a transition plan.
• Demonstrating commitment to stakeholders – by showing internal and external stakeholders that the business is allocating resources to turn targets into action and respond to the climate emergency.

“The document helps finance teams to identify transition activities that are likely to have financial effects,” she says. “It provides a range of questions that finance teams can ask colleagues to facilitate this. For example, you may ask your estates team whether they are investing to make any fixed assets more resilient to climate-related physical risks, eg, installing flood defences. Or your products team whether any new low-emissions products or services are going to be introduced.”

The report sets out some questions that organisations should consider when looking to align transition planning and financial planning. The questions are grouped into line items, such as capital expenditure (capex), revenue and operating expenditure (opex); value chain and regulation, internal pricing and offsets; and raising capital.

The line items questions focus specifically on those referred to in certain sustainability reporting standards, such as revenue, capex and opex. 

“Although the document focuses on these three line items, transition-planning activities identified under one line item may impact all three,” says Jackson. “For example, if a new low-emissions product is introduced, it may require new manufacturing machinery (capex), generate new sales (revenues) and incur additional production costs (opex).”

The value chain questions look at the delivery of their net-zero ambitions and its resilience is dependent on its value chain and the actions in the value chain impact the entity’s transition. Some questions look at regulation, internal pricing and offsets, says Jackson. “This is an evolving space and has financial implications.”

When it comes to raising capital, the paper outlines the kinds of capital resources that organisations might require when aligning transition planning and financial planning.

The questions were developed by A4S with support from ICAEW, drawing on insights from A4S network members, including its Net Zero Taskforce, and other leading experts. 

The document also includes examples of organisations that are making progress when it comes to aligning transition and financial planning, including Levi Strauss & Co, Sainsbury’s, Westpac, Unilever, Hilton, Adecco, Kering, Storebrand, National Grid, Apple and Solvay.

For organisations wanting to get started with this alignment, the first step is to identify relevant activities that the business is undertaking that may have financial implications, says Jackson. “The key questions in our document provide a structured way to do this. This should sit alongside the development of a greenhouse gas (GHG) emissions baseline and setting targets.” 

Even a high-level estimate will help to identify GHG emissions hotspots, allowing organisations to direct efforts and capital to areas where the greatest emission reductions may be achieved, says Jackson, for example via the managed phasing out of high-emitting assets. “Targets are likely to have been developed based on the key actions required to achieve them – for example, fleet vehicles to become 100% electric by 2030. These actions provide a good starting point for estimating the financial implications of delivering targets.”

“If we’re to make serious progress in creating a more sustainable way to do business, transition planning and financial planning must connect,” adds Richard Spencer, ICAEW’s Director, Sustainability. “This document provides a starting point for organisations to bring their net-zero and nature-positive ambitions into the financials.”

More information

Further A4S resources on carbon accounting and reporting include guidance and a case study on Deutsche Post DHL Group.