Why Transition Plans Need a Wider Lens

From January 2025, the first wave of AASB S2 climate disclosures will force supers to demonstrate not just ambition but credible roadmaps for reaching it. The Treasury’s draft Transition Planning Guidance offers a clear structure: foundations, implementation, engagement, metrics, governance.

Crucially, it also makes a point too often overlooked: credible plans must be grounded in assumptions about external factors. Treasury lists policy changes, technology cost curves, macroeconomic shifts, and even physical impacts of climate change as examples of what must be considered. And it recommends scenario analysis to test robustness under different plausible futures.

This matters because transition plans built on internal levers alone are misleading. A transport-heavy portfolio company cannot project fuel consumption without reference to efficiency standards or the uptake of electric vehicles. A property trust cannot forecast emissions without acknowledging the pace of grid decarbonisation. For super funds consolidating hundreds of such plans, the aggregate error compounds into billions of dollars of misallocated capital.

The challenge is not recognition but execution. The guidance tells firms to use external assumptions—but few have the expertise or tools to curate them rigorously. External trends are messy, contested, and constantly shifting. Without a structured process for gathering, scoring, and updating assumptions, disclosures risk lapsing into box-ticking.

The solution is transparent methodologies that embed external data and document its provenance. That means triangulating official forecasts, peer-reviewed studies, and market data; treating each trend as provisional, subject to revision; and making assumptions auditable to investors and regulators alike.

For super funds, the prize is credibility. Regulators and members will ask not just what the plan is, but whether its assumptions are reasonable. By following Treasury’s guidance and embedding exogenous trends, funds can produce transition plans that are not only compliant but convincing. In an uncertain world, credibility is the only currency that counts.