Best Practices for Building a Transition Plan in Asset Management

As asset managers face increased pressure to commit to tangible sustainable strategies, developing a Climate Transition Plan has become a priority for many. The Transition Plan Taskforce (‘TPT’), launched in 2022, produced the TPT Disclosure Framework, with specific guidance for Asset Managers (published in April 2024), to help the industry on its journey. Alpha FMC recently conducted an in-depth peer analysis of 20 asset managers’ progress on Transition Planning and related reports, uncovering valuable insights. This article outlines the best practices across four dimensions which can help other asset managers enhance their own Transition Plans.

A clear and engaging narrative is crucial for effective communication throughout your Transition Plan. The best reports in this dimension demonstrated the following:

• Evidencing progress: The strongest reports convey tangible progress toward the firm’s sustainability strategy and related Net Zero targets. Articulating specific achievements (e.g. data points evidencing progress on specific and measurable targets) helps establish credibility and trust.
• Minimizing jargon: Some reports limit the use of technical jargon and ensure that complex terms are defined in a glossary. This approach makes content accessible to wider audiences e.g. retail investors.
• Highlighting case studies: Incorporating case studies provides practical examples of how asset managers are achieving their targets. Real-life scenarios demonstrate commitment and illustrate the feasibility of actions within the wider report.

Content layout and clarity are critical for ensuring effective communication. Key elements we observed in the most readable reports included:

• Design and layout: Visually appealing designs enhance overall content comprehension. Most firms presented complex information succinctly using infographics, bullet points, and tables.
• Clear messaging: The best reports feature clear, concise language with short sentences and action-oriented verbs. This clarity fosters a better understanding of what can sometimes be complex information.
• Reports’ location: Few reports are clearly signposted on the firms’ websites, usually within a broader Sustainability webpage. Only some of the regular updates to the Transition Plan are easily accessible and referenced, for example when made in subsequent Annual Reports.

Setting clear Net Zero targets is an essential element of Transition Planning. However not all asset managers have disclosed the related metrics to enable their realization. Best practices from our analysis include:

• Differentiating the targets: Most reports clearly differentiate between operational and investment targets, alongside stating an overall target (e.g. Net Zero by 2050). Most firms aim to be Net Zero for operations by 2030.
• Disclosure of underlying metrics: The more robust reports provide transparency around the metrics underpinning their targets. Detailed disclosures enhance accountability and allow for more meaningful commitments.

We observed asset managers disclosing a wide range of data points and leveraging different methodologies and vendors. Key strengths included:

1. Targets validated by SBTI: The reports with targets reviewed and validated by the Science Based Targets Initiative (‘SBTI’) significantly increase their credibility. Some firms also signal their intention of publishing SBTI targets in future iterations.
2. Transparency around data gaps: Most reports include specific sections or disclaimers around data limitations, specifically the climate modelling methods employed.
3. Disclosure of data vendors: Only some firms disclose the names of their sustainability data vendors. This is beneficial as disclosing the vendors acknowledges that the calculations vary widely across providers, thus helping readers understand how metrics were calculated.

Most firms we have spoken with are prioritizing their transition planning programs in 2025. If your firm is embarking on a similar journey, building out the first iteration or expanding on the sophistication of an existing Transition Plan, consider the following tips:

1. Define your Strategic Ambition: Establish clear objectives, priorities, and the key assumptions guiding your Transition Plan from where you are currently (e.g. while leveraging your existing climate data). Align these with robust, credible targets and interim milestones.
2. Develop an actionable Implementation Roadmap: Develop implementation steps for transitioning your business operations and investments. Set appropriate metrics to underpin your targets and integrate your Transition Plan into your wider financial planning. On top of this you should also shape the right governance to be able to deliver your plan successfully.
3. Start your Plan’s execution: Actively engage stakeholders (internally and within your value chain) as you develop and socialize the Plan. For investments – consider how you will incorporate assessment of climate-related factors as part of your investment decisions. For operations – the focus should remain on decarbonizing your operations and establish policies that support this.
4. Report and monitor progress: Build your Transition Plan in line with the TPT Asset Managers Sector Guidance and commit to regular internal monitoring. Provide annual updates on your progress against your set targets, including relevant evidence through a powerful narrative.