In August 2025, the Australian Government (Treasury) released its Consultation Paper on Climate-related Transition Planning Guidance proposing voluntary guidance on best practice for climate‑related transition planning (Draft Guidance). The proposed guidance is designed to help organisations plan credibly for decarbonisation and climate resilience, and to disclose those plans consistently with emerging international norms.
The Draft Guidance is part of Australia’s Sustainable Finance Roadmap and is a timely complement to the new mandatory climate‑related financial disclosure (CRFD) regime, which commenced for reporting entities on a phased-in basis from 1 January 2025 and includes requirements to disclose an entity’s climate transition plan. See our knowledge insights on the mandatory sustainability reporting for further details.
Below, we set out the key features of the Draft Guidance and practical tips to engage with the consultation process and prepare for credible transition planning.
Key takeaways
Best-practice: Treasury’s Draft Guidance proposes voluntary best‑practice guidance to support organisations that choose to prepare a climate transition plan and to enhance market comparability. While the development of a transition plan is not currently mandated, entities required to prepare sustainability reports including CRFD, under the Corporations Act 2001 (Corporations Act) will be required to disclose information about any transition plan they have, including how it sets and reviews targets, how it plans to achieve those targets and information about its performance against those targets.
Design principles: The Draft Guidance is informed by four key principles: international alignment, supporting domestic decarbonisation and adaptation, ambition with flexibility, and “climate first but not only” – encouraging consideration of just transition and nature alongside climate.
Framework alignment: Treasury proposes endorsing the use of the IFRS Transition Plan Taskforce (TPT) Disclosure Framework (TPT Disclosure Framework). Entities are also encouraged to consider alignment with the Australian Sustainable Finance Taxonomy and applicable CRFD obligations in accordance with the Australian Accounting Standards Board (AASB) S2 Climate-related disclosures (AASB S2) when preparing transition plans.
Domestic policies: the Draft Guidance proposes that entities align their transition plans with best practice under Australia’s climate commitments and policies, including its upcoming nationally determined contribution (NDC) under the Paris Agreement, National Adaptation Plan, National Climate Risk Assessment, Net Zero Plan and sectoral pathways.
Consultation process: consultation is open until 24 September 2025, providing an opportunity for stakeholders to contribute to the direction and design of the final guidance. Treasury intends to finalise the guidance by the end of 2025.
Setting the scene: what is transition planning and how does it interact with mandatory climate-related financial disclosures?
Global financial markets are rapidly evolving as organisations are increasingly focusing on managing and disclosing climate-related risks and opportunities. According to the Australian Council for Superannuation Investors (ACSI), over 82% of the ASX 200 (by market capitalisation) has committed to achieving net zero. As a result, transition planning is becoming an increasingly significant component of organisational strategic planning, to credibly work towards emission reduction commitments and manage the long-term risks and opportunities presented by climate change.
Transition planning is the strategic, ongoing process to help organisations identify and address climate-related risks and opportunities, respond to market expectations, and enhance transparency for investors and lenders. It involves setting climate goals (such as net-zero emissions targets), developing actions to achieve these goals, and establishing governance and reporting systems to support implementation.
A transition plan is the strategic document produced from this process, outlining the organisation’s targets and the steps it will take and the resources it will allocate to achieve these targets and transition towards a lower-carbon economy.
Investors, banks and insurers are increasingly using transition plans – which translate high-level net-zero commitments into concrete actions, investments and milestones – to inform price risk, capital allocation and assess green claims.
In addition, on a phased-in basis from 1 January 2025, large Australian entities captured by the mandatory sustainability reporting framework will be required to disclose material information about “any transition plan” the entity has. The AASB S2 defines a climate-related transition plan broadly as an aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-emissions economy, including actions such as reducing its greenhouse gas (GHG) emissions. The absence of a credible plan – or opaque disclosure – may heighten litigation, enforcement and reputational risk.
The Treasury’s proposed guidance is designed to help businesses navigate transition planning and best-practice disclosures, and make transition plans more accessible, comparable and effective.
Treasury’s proposed approach and design principles for transition planning
The Draft Guidance identifies and proposes being guided by four overarching principles.
Principle | Application in the Draft Guidance. For best practice, entities should: | |
Internationally aligned |
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Supports domestic decarbonisation and adaptation |
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Balances ambition and flexibility |
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Climate first but not only |
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Treasury’s proposed guidance for preparing transition plans
The Draft Guidance proposes that organisations align their transition plans with the structure of the TPT Disclosure Framework or, alternatively, include an appendix that explains how the sections of their transition plans correspond to the TPT Disclosure Framework.
At a high level, the TPT Disclosure Framework is based on disclosures across five core sections, which the Draft Guidance sets out as follows:
Foundations: an overview of the company’s strategic ambitions for responding to climate-related risks and opportunities, and mitigation and adaptation objectives. These should be informed by domestic and international commitments and best practice, including Australia’s nationally determined contribution (NDC). This section should also identify the business model and key underlying assumptions.
Implementation: the concrete steps for how an organisation will achieves the goals set within their transition plan and how these actions will be resourced, including by reference to domestic ambition and policies, notably the upcoming National Adaptation Plan.
Engagement Strategy: how the organisation will effectively keep stakeholders (including workers, industry, customers and relevant First Nations communities) involved, informed and supported throughout the organisation’s transition.
Metrics and Targets: the metrics and targets set by the entity, disclosed transparently, with measurable benchmarks and in accordance with best practice under the Paris Agreement, NDCs and sectoral pathways. Organisations should also disclose their intended use of carbon credits to achieve their targets.
Governance: the leadership structure, decision-making process and accountability mechanisms required to guide and control implementation of the plan, including board oversight and reporting, management’s role and initiatives to enhance internal skills and competencies.
Why this guidance matters for boards, executives and sustainability teams
Treasury proposes valuable guidance for Australian businesses to meaningfully engage with transition planning processes and prepare a credible and ambitious transition plan, in line with evolving market expectations.
Once finalised, the guidance will complement and, in many cases should be read in conjunction with, the CRFD requirements under the AASB S2 and the Australian Sustainable Finance Taxonomy to assist entities to develop best practice disclosures across their climate governance materials and reports. As directors will be responsible for signing off that sustainability reports are compliant with AASB S2, including with respect to any disclosures around transition plans, it is important that boards, executives and their sustainability teams are well versed with the emerging guidance materials.
The Draft Guidance also provides useful direction for organisations on the use and disclosure of carbon credits and renewable energy certificates and practical tips to implement good climate governance and strategy. These will be an important reference point for companies at all stages of their transition and reporting journey – from initial internal capability uplift, setting targets and ambition, preparing and disclosing transition plans, and preparing AASB S2 compliant sustainability reports.
Feedback sought from Treasury
Treasury is seeking feedback to inform the final guidance it intends to release by the end of the year. In particular, industry’s views are sought with respect to:
Treasury’s proposed approach for the transition planning guidance, including whether:
the proposed design principles are appropriate or there are others that should be considered?
businesses intend to use the TPT Disclosure Framework to develop their own transition plan or for investment and lending decisions?
the Draft Guidance should be less or more prescriptive?
there be value in further sector-specific guidance?
Treasury’s proposed Transition Planning Guidance:
is the level of proposed detail sufficient and if not, what additional advice or detail should be provided?
would the use of further case studies or examples be of assistance?
are the resources and materials listed in Appendix A to assist transition planning useful and should any other relevant materials be included?
Submissions can be made until 24 September 2025 by:
Email: SustainableFinanceConsultation@treasury.gov.au; or
Mail: Green Bonds and Transition Guidance Unit
Climate and Energy Division
The Treasury
Langton Crescent
Parkes ACT 2600
Preparing for transition planning
There are also other industry resources being published to assist companies in preparing for credible transition planning. In July 2025, the Australian Institute for Company Directors and ACSI released a joint report on ‘Governing for net zero: The Board’s role in organisational transition planning’, providing practical guidance for boards on:
integrating climate transition planning into core business strategy
understanding transition planning in the context of directors’ duties and compliance obligations
leading and overseeing effective organisational responses to climate change.
The Climateworks Centre has also recently released its guide to credibility for corporate climate transition plans, setting out key credibility criteria based on best-practice that companies, investors and regulators can use to develop and assess climate transition planning. The guide also provides valuable information for entities disclosing their transition plans in accordance with AASB S2 under the CRFD regime. The Guide is informed by extensive global best practice resources and industry input and referenced in the Treasury’s Draft Guidance as a useful point of reference for entities.
Our Climate Change and Sustainability team are closely following the development of Australia’s CRFD regime and initiatives pursuant to the Sustainable Finance Roadmap. We are actively assisting boards, executives and sustainability teams to navigate their obligations and prepare compliant disclosures, including credible transition plans.
For further information or support preparing a submission or transition plan, please reach out to our team.