The Financial Stability Board has published a report examining how firms’ climate transition planning and transition plans could support financial stability monitoring. It concludes that these plans provide forward-looking information on how non-financial companies and financial institutions may adjust to climate risks, which can help authorities measure and monitor climate-related financial risks, but their current usefulness for financial stability and macroprudential assessments is constrained by limited data and uneven metrics. According to the report, transition plans can support financial stability through three channels: improving firms’ strategy setting and climate-related risk management, informing investment decisions by addressing information gaps and market failures, and helping authorities monitor transition and physical risks across the financial system and real economy. Their use remains at an early stage because plans are primarily designed for business strategy and target setting, are available for only a restricted number of firms, and differ widely in scope, coverage, methodologies and the quality of key metrics. The report says broader adoption and continued standardisation by international organisations and standard setters are needed to make transition plans more usable for financial authorities.

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