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Prudential net zero transition plans: the potential of a new regulatory instrument

Author

Listed:
  • Simon Dikau

    (Grantham Research Institute, London School of Economics)

  • Nick Robins

    (Grantham Research Institute, London School of Economics)

  • Agnieszka Smoleńska

    (Grantham Research Institute, London School of Economics
    Polish Academy of Sciences)

  • Jens van’t Klooster

    (Grantham Research Institute, London School of Economics
    University of Amsterdam)

  • Ulrich Volz

    (Grantham Research Institute, London School of Economics
    School of Oriental and African Studies (SOAS))

Abstract

Net zero transition plans are a promising additional instrument for prudential supervisors to assess, address and bring distant financial risks into the present. To date, transition plans have primarily emerged as non-financial disclosure requirement and as such, their prudential application has been limited. In this article, we discuss the role that transition plans can play as a new regulatory tool in banking supervision. The article outlines steps towards incorporating transition plans into prudential policy, thereby enabling supervisors to effectively use transition plans as a forward-looking instrument to better manage and overcome some of the challenges associated with climate transition risks.

Suggested Citation

  • Simon Dikau & Nick Robins & Agnieszka Smoleńska & Jens van’t Klooster & Ulrich Volz, 2025. "Prudential net zero transition plans: the potential of a new regulatory instrument," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(1), pages 85-99, March.
    • Handle: RePEc:pal:jbkreg:v:26:y:2025:i:1:d:10.1057_s41261-024-00247-w
    DOI: 10.1057/s41261-024-00247-w
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