Climate transition planning for financial institutions

  • Publication
  • September 12, 2023

What is a climate transition plan? In short, it should be the primary way that financial institutions communicate their climate-related actions

Climate transition plans are essential for helping your financial institution navigate the complex shift to a low-carbon economy. These plans are gaining momentum globally as they not only contain climate commitments and targets, but also explain how those objectives fit strategically into your overall business strategy. An effective transition plan can provide your firm with a roadmap for driving sustained business outcomes as market dynamics change and society’s expectations shift.

Financial services institutions face unique challenges in developing a transition plan because the bulk of their emissions are related to lending, underwriting, investment and insurance activities, or what’s known as financed, facilitated or insured emissions. Reducing these financed emissions means evaluating portfolios that can include thousands of financial products and clients.

Developing a credible transition plan can serve as a powerful prioritization mechanism to inform and take climate action in support of your business objectives and strategies. The climate transition plan should be the primary way your financial institution communicates climate-related actions to investors, clients and other stakeholders. A transition plan can also help your firm address increasing calls for transparent and thorough disclosures on climate strategy actions and progress. We anticipate that regulatory requirements and industry frameworks will likely lead to increased stakeholder interest in these plans across sectors and geographies.

By beginning the transition planning process now, you can strengthen climate risk management capabilities, better position your business to capitalize on market opportunities and craft a compelling story about your firm’s role in shaping a sustainable future. In addition, starting early can lead to competitive advantages by accelerating the development of in-house knowledge (including the evaluation of your counterparties’ transition plans) and provide lessons learned that can lead to improved outcomes.

Examples of the important role financial institutions play in the energy transition:

  • Banks: Provide lending services that direct financing to zero-carbon or carbon-negative projects
  • Insurance: Provide risk management and risk transfer solutions, climate-aware underwriting, and sustainable investment of premiums
  • Asset and wealth managers: Steer capital toward sustainable investment activities and products
  • Real estate owners and developers: Reduce building-related energy consumption and emissions while investing in resilience and adaptation

Why your financial institution should be developing a transition plan

A transition plan provides three key benefits for financial institutions.

It can serve as a unifying force to increase collaboration and drive change to meet your firm’s and clients’ climate-related commitments and targets. Financial institutions are setting targets to decarbonize operations and support climate goals. Transition plans can help you mobilize and unite stakeholders and align efforts to create a single, coordinated transition strategy.

It can enable strategic, coordinated climate-related risk assessment to find opportunities in the face of uncertainty. Transition plans leverage and build upon existing climate risk management analysis to help financial institutions prepare for a range of possible climate pathways in an integrated manner. Through transition planning, your firm can identify common strategies across prioritized climate pathways to support an orderly transition, facilitate short-term actions and adapt to changes in the long run (including business model reinvention).

It facilitates effective communication of actions to internal and external stakeholders, including regulators. A transition plan provides a unique opportunity to provide detailed, transparent communication on your actions, progress and impact. In addition, it enables your firm to respond to emerging regulatory disclosure requirements consistent with transition pathways.

The five elements of a credible transition plan

Every transition plan will look different. The plan’s structure depends on your company’s business model, size, sector, geographical footprint and level of climate ambition, as well as the method of reporting and disclosure (see Transition planning for financial institutions for more on reporting and disclosure frameworks from organizations such as the Transition Planning Taskforce (TPT), the CDP, and the Glasgow Financial Alliance for Net Zero).

PwC examined dozens of transition plans and we have identified five high-level elements of an effective and credible plan.

Foundational analysis

  • Risk and opportunity assessment: Identify and model climate-related risks and opportunities over short-, medium- and long-term time horizons.
  • Scenario analysis: Conduct baseline and periodic scenario analysis to understand the potential impact of various climate-related scenarios on your operations, financial performance and strategic planning processes.

Ambition and strategy

  • Climate-related goal or commitment: Define your climate ambitions and establish overarching goals or commitments (e.g., absolute emissions reduction targets, portfolio carbon intensity targets) to guide actions within the transition plan.
  • Enterprise climate strategy: Cascade your firm’s ambition and commitments to the different business units and internal teams. This includes the integration of climate into strategic and business unit planning to clearly outline how climate-related strategic priorities will drive value creation for your firm.

Transition blueprint

  • Management actions: Detail the actions to be taken and policies to be instituted to achieve time-bound, climate-related commitments. This may include developing/enhancing sustainable finance products and services, instituting an internal carbon price, integrating ESG factors into the investment strategy, and screening high-emitting industries/sectors, as well as internal initiatives to integrate the transition plan into the fabric of your organization’s processes.
  • Stakeholder engagement: Outline which stakeholders should be engaged, how often they will be engaged and through which mechanisms. Stakeholder engagement is critical to better understand the more material topics, the actions to prioritize, and to gather feedback on the effectiveness of your transition plan over time.

Governance and metrics

  • Governance: Institute a robust governance structure, involving board oversight and management accountability for climate-related risks and opportunities.
  • Metrics and indicators: Establish measurable, time-bound performance metrics and indicators to track progress toward achieving your organization’s climate goals, assess the effectiveness of your transition plan and reinforce accountability.

Reporting and disclosure

  • Reporting quality and comprehension: Provide clear, consistent and transparent disclosure of the organization’s transition plan — including risks, opportunities, governance, strategy, targets and performance against these targets — in alignment with voluntary and regulatory disclosure frameworks (e.g., the International Sustainability Standards Board standards).
  • Data, processes and controls: Integrate transition plan disclosures into the existing voluntary climate-related disclosures framework, both from messaging and underlying process and technology perspectives.

How your financial institution leaders can help develop a transition plan

Developing a credible climate transition plan starts at the top. Your CEO will set the strategic direction, lead and manage implementation, and communicate the vision to internal and external stakeholders. The board should also be intimately involved with evaluating the strategy and providing oversight. This vision for the firm’s transition needs to be captured in a narrative format before execution commences.

Execution of the plan falls to cross-functional teams that include representatives from across the enterprise. Leaders from sustainability, finance, legal, compliance, technology and human resources should be involved throughout the process.

Based on our research, roles and responsibilities related to developing and executing the transition plan may be effectively allocated in the following manner (see Transition planning for financial institutions for deeper analysis on these responsibilities):


The Chief Sustainability Officer can:

  • Establish enterprise climate strategy, commitments, targets and supporting policies to inform the transition plan
  • Support the integration of transition plan disclosures into existing climate communications and reporting
  • Coordinate enterprise-wide action under the transition plan

Front office

These teams can:

  • Integrate climate considerations into business unit strategy and objectives
  • Provide climate-related products and services to clients
  • Coordinate with cross-functional teams to implement climate transition plan, such as gathering client data for monitoring and decision-making


The Chief Risk Officer can:

  • Conduct baseline risk identification and exploratory climate scenario analysis
  • Integrate climate risk considerations into enterprise risk management framework
  • Refresh enterprise risk appetite to incorporate climate criteria


The Chief Legal Officer can:

  • Monitor transition plan regulatory and policy developments
  • Support compliance with applicable transition plan regulatory requirements
  • Facilitate board-level understanding and oversight of legal, regulatory, and corporate governance aspects of the transition plan
  • Evaluate potential legal risks associated with content communicated in transition plan
  • Evaluate current public policy and advocacy positions in light of climate objectives
  • Support engagement with external stakeholders


The Chief Financial Officer can:

  • Conduct climate impact financial analysis and forecasting
  • Collaborate on enterprise-wide climate-related initiatives such as enterprise sustainability taxonomy and greenhouse gas emissions calculations
  • Incorporate climate-related data and analysis into reporting and disclosures
  • Support the transition planning process through capital management
  • Evaluate the utility and implementation of an internal carbon price


The Chief Information/Technology Officer can:

  • Develop target state operating model and data architecture to support transition plan development and execution, including integrating externally-sourced data and technology
  • Support cross-functional teams in developing metrics and tools to enable and monitor transition plan execution, such as enhancing analytics and reporting capabilities
  • Establish and enhance data governance policies, including controls, that support data security, privacy and integrity

Human resources

The Chief Human Resources Officer can:

  • Assess talent needs and support the development of a resourcing plan to close gaps
  • Co-develop climate upskilling and awareness activities to support transition plan execution and change management, in collaboration with the Sustainability Office
  • Drive alignment of incentives to climate commitments and transition plan, as appropriate

10 questions to get your financial institution started

We know that financial institutions are at different stages in developing your transition plan. Regardless of where you are on that journey, your financial institution should consider these ten questions as you develop and implement a transition plan. PwC can help you with the answers.

  1. What do we hope to accomplish by developing the plan, and how will we measure its success?
  2. Have we defined our overall climate ambition? What overarching climate goal or commitment will serve as our plan’s north star?
  3. What are the primary drivers leading us to develop a plan and what maturity do we hope to achieve for this plan?
  4. Which team(s) will own, develop, implement, govern and update the plan and what is our desired timeline for developing and implementing this plan?
  5. What capabilities and experience will be needed to develop and implement the plan, and are these capabilities available in-house or will we need to externally source them?
  6. What constraints should we consider when developing the plan (e.g., regulatory obligations that may impact the scope and mandatory disclosure requirements)?
  7. How will the plan itself be structured (e.g., frameworks and methodologies to be referenced and/or followed)?
  8. How should we engage and communicate with our stakeholders (including employees, customers, investors, regulators and the community) about our plan?
  9. How might the plan align and advance our business and climate-specific strategy and objectives, including implications to business model, financial planning and risk management?
  10. How will we integrate the plan disclosure into our existing ESG and climate-related reporting framework (e.g., messaging, distribution channels and assurance requirements)?

Transition planning for financial institutions

Contact us

Brittany Schmidt

Principal, Financial Services Consulting, PwC US


Rohan Poojara

Director, Financial Services Consulting, PwC US


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