National Treasury is asking the financial services industry to weigh in on how climate transition planning should be incorporated into business strategy – and how it should relate to climate disclosures already being made voluntarily.
The proposed Climate Transition Planning and Disclosure Framework is still under consultation, and its future regulatory status remains open. Treasury told Moonstone that “regulatory authorities will consider how this, and other similar disclosures, will be treated” in future.
The consultation is open for public comment until 10 December. The proposed scope covers all regulated financial institutions, but Treasury says the complexity and rigour of transition planning should be proportionate to each firm’s nature, size, complexity and resources.
The consultation allows financial advisers and other regulated businesses to comment on how the guidance should work in practice, what smaller firms can reasonably be expected to do, and how it should interact with existing disclosures.
Who would be covered?
Treasury’s proposed scope extends to all regulated financial institutions, across banking, insurance, investment management and other regulated financial activities.
In its response to Moonstone, Treasury said the “complexity and rigour” of transition planning activities should be proportionate to the nature, size, complexity and resources of financial firms. It added that smaller firms would be required to do less than larger firms.
That leaves practical questions for the consultation: what should a smaller financial services business be expected to do, what data would it need, and how much of the work would depend on information supplied by clients and other businesses?
Treasury said the proposed framework was “complementary to guidance already provided by the regulatory authorities”, adding that it would provide more detail and methodological frameworks.
Existing guidance already points towards greater climate-related disclosure. The South Africa Financial Sector Transition Plan White Paper refers to climate-related governance, risk management and disclosure guidance issued by the Prudential Authority for banks and insurers, as well as the FSCA’s work on climate and sustainability reporting. The JSE also encourages listed companies to report voluntarily in line with its sustainability and climate disclosure guidance.
In its October 2025 guidance for banks, the Prudential Authority said climate-related disclosures are expected to become mandatory over time. It did not set a date, noting that the timing would depend partly on disclosure requirements for non-financial companies and developments by international standard-setting bodies.
Treasury is separately seeking views on how its guidance should be incorporated into firms’ strategic planning and how it should interact with climate-related disclosures currently made voluntarily in South Africa.
What is climate transition planning?
Transition planning is broader than setting a carbon-reduction target or pledging to reach net zero. It involves assessing how climate change and the shift toward a lower-emissions economy could affect an institution’s strategy, risks, customers, and investments, and deciding how to respond.
Two types of risk feature in the proposed framework.
Physical risks arise from climate impacts such as floods, droughts, heatwaves and changing rainfall patterns. These can damage property, disrupt supply chains, affect agricultural production and threaten businesses’ ability to operate.
For insurers, physical risks can affect claims and underwriting. For banks, they can affect borrowers’ ability to repay loans and the value of assets held as security. Investment portfolios and retirement funds can also be exposed when climate events affect the companies and assets they hold.
Transition risks arise from changes in policy, technology, consumer demand and market expectations as the economy moves towards lower emissions. Carbon costs or new technologies, for example, can change the profitability of emissions-intensive businesses. The same transition can create opportunities for businesses developing lower-emissions products, technologies and services.
A financial institution’s exposure does not stop at its own offices, vehicles or electricity use. Banks have climate-related exposures through the businesses they finance; insurers through the risks they underwrite; and asset managers through the companies and assets in which they invest.
That makes the quality of information from clients, borrowers and investee companies a practical issue for transition planning. Institutions need to understand not only their own exposure, but also how the businesses connected to their portfolios are responding.
The paper does not present transition planning as a blanket instruction to withdraw from high-emissions industries. Instead, it calls for institutions to assess risks and opportunities, identify actions and consider how finance and engagement can support credible transition pathways. In South Africa, those plans also need to account for adaptation to physical climate impacts and the social and economic implications of the transition.
What would a transition plan contain?
The proposed framework groups transition planning into five areas: foundations, implementation, engagement, metrics and targets, and governance.
In practice, an institution would need to understand the climate-related risks and opportunities affecting its business model and portfolios; decide what actions to take; engage with clients, investee companies and other stakeholders; measure progress; and establish who is responsible for the plan.
Targets alone would not constitute a plan. The proposals link them to implementation, governance and measures of progress.
How prepared is the sector?
The consultation paper draws on a World Bank survey conducted in May and June 2025, with support from the FSCA and the South African Reserve Bank. It covered 37 financial institutions, including banks, insurers, asset owners and pension funds, asset managers and consultants, as well as an industry association.
The results suggest that some institutions have established parts of the process, but progress varies across different elements of transition planning.
About 61% of respondents reported having an engagement strategy and 67% had specified governance arrangements. Two-thirds (67%) had measured or were measuring greenhouse gas emissions, while 52% had completed emissions assessments. Only 28% had measured Scope 3 emissions, and 32% had set interim targets.
Scope 3 emissions occur across an organisation’s value chain rather than directly from its own operations. For financial institutions, they can include emissions associated with the businesses they lend to, insure or invest in. Measuring them can be difficult because the information depends on external companies.
The Prudential Authority’s guidance for banks recognises these data challenges. It says banks should use reasonable and supportable information available at the reporting date without undue cost or effort, and disclose material limitations in their data, assumptions and estimates. This acknowledges that climate-related disclosures depend partly on the availability and quality of information, rather than simply on a bank’s willingness to report.
The consultation paper also cautions that the World Bank survey may not represent the financial sector as a whole and could favour institutions already further along in transition planning. The findings are not a complete measure of industry readiness.
Even within that limited sample, the results point to practical hurdles for any framework: obtaining reliable data, setting measurable targets, turning plans into action, and assessing the transition plans of clients and investee companies.
The investment challenge
South Africa’s transition involves more than reducing emissions. It also requires investment in adaptation and a just transition, which considers the social and economic consequences of changes to the economy.
National Treasury estimates that investment needs for climate change mitigation, adaptation and a just transition will average 4.4% of gross domestic product annually through to 2050.
Financial institutions have a role in directing capital towards those needs while managing the risks that climate change and economic adjustment pose to their own balance sheets and portfolios. Transition planning is intended to bring these considerations into strategic decisions rather than leave them as a separate disclosure exercise.
Stakeholders can comment on the proposed framework’s design, implementation, proportionality and enabling conditions. Written submissions must be sent to Vukile Davidson at transitionplanning@treasury.gov.za by 10 December.
