Treasury's draft climate planning playbook signals progress - but also exposes blind spots.
As global climate talks at COP30 shift from setting lofty targets to transforming the systems that will get us there, Australia has been quietly strengthening its climate resilience rulebook.
We're making headway - but Treasury's draft Transition Planning Guidance shows we're not there yet.
The proposal aims to make transition plans more transparent and comparable, helping capital flow toward businesses genuinely preparing for a decarbonising and warming world.
The problem is one of focus. While the draft sensibly aligns with global standards, the IFRS Transition Plan Taskforce (TPT) framework it's modelled from is largely about disclosure - what companies report at the end of the process.
The danger? Glossy transition plans that look credible on paper but fail to guide the right investment or adaptation decisions.
Creating plans is less important, in this equation, than building planning capability to allow us to flexibly respond to a number of potential future risks.
Australia's transition isn't just about cutting emissions. Even under a 1.5°C scenario - now considered highly optimistic - we face more frequent and severe climate extremes.
The National Climate Risk Assessment (NCRA) warns that historical patterns no longer apply. Climate risks are changing in frequency, intensity, and nature, but the expected impacts are now well reported - including increased heat-related deaths, rising sea levels threatening more coastal homes, and ecosystem collapse.
These physical risks directly affect business survival, supply chains, insurance costs, and workforce health. The shift from a stationary world - where the past reliably predicted the future - to a non-stationary one means experience is no longer a safe guide.
The proposed Guidance rightly highlights physical climate risks as a central part of transitioning to a low-emissions, climate-resilient economy.
However, it doesn't require organisations to explain how their plans are developed.
Yet it's this planning process that truly determines how well a company can withstand climate risks that include inherent uncertainty.
Traditional planning approaches - linear, target-driven, and "least-cost" focused - aren't great measures for dealing with a future that bears no resemblance to the past.
Tools, not templates
In climate risk accounting, " storylines " offer a better way to navigate that uncertainty.
They complement models by translating scientific projections and other forms of evidence, such as asset failure curves or customer risk tolerance, into business-relevant narratives that show how climate risks could plausibly unfold in the real world.
For example, more extreme weather might disrupt supply chains, while heatwaves or power outages could affect workforce productivity. These cascading and compounding effects become clearer - and more tangible - when explored through storylines.
By embedding context, causality and plausible future pathways, this narrative approach transforms risk assessment into decision-useful insight.
It does this by acknowledging the full range of known uncertainty more honestly than a purely quantitative scenario that prioritises probability over plausibility.
And because robust strategies should hold up when tested against a plausible future that acknowledges the full range of known uncertainty, storylines help investors and regulators judge which plans are genuinely resilient.
It's like planning a road trip without knowing the weather or traffic - you pack for different conditions and plan alternate routes.
It's like planning a road trip without knowing the weather or traffic - you pack for different conditions and plan alternate routes.
Storylines are part of a larger set of tools developed in the sciences, collectively known as Decision-Making under Deep Uncertainty (DMDU), which New Zealand has embedded into its climate reporting framework.
The goal should be for transition plans that solve real climate problems - not just reduce emissions.
Plans should be dynamic, and focus on resilience, innovation, and long-term value, include realistic steps and consider physical risks.
Treasury has an opportunity to provide end-to-end guidance that supports organisations in these efforts, sharing case studies that illustrate these planning steps, along with sample disclosures.
Capital core to credibility
But, while targets and metrics matter, they're not the true test of transition credibility. The real tell lies in capital allocation.
How a company directs its financial resources - what it builds, buys, and maintains - reveals far more about its future than our current reporting standards.
Recent evidence suggests that while two-thirds of ASX200 companies have made net zero commitments, few have adequately factored climate into investment decisions.
If investments continue to "lock in" high-emission assets or climate vulnerabilities, no amount of disclosure can make a transition plan credible.
It's why organisations should share what they're spending on their transition plans in any reporting.
The Australian Sustainable Finance Taxonomy provides a framework that could be used to help determine the proportion of funds needed to support a genuine transition.
Australian approach to global warming
Australia's guidance shouldn't merely replicate international frameworks; it should augment them.
Our exposure to climate risk is among the highest in the world, and our policy landscape, economic structure, and natural systems demand a localised approach.
By embedding domestic context - linking to the National Climate Risk Assessment and the National Adaptation Plan, sectoral decarbonisation pathways, and the First Nations Clean Energy Strategy - Treasury can ensure its guidance is scientifically credible, strategically useful, and nationally relevant.
Transition planning is the bridge between climate science and economic decision-making. It can't be reduced to disclosure checklists or static targets.
It must help Australian organisations build adaptive capacity, integrate mitigation and resilience, and align capital with long-term sustainability.
Australia doesn't just need climate plans. It needs better climate planning.
Read the ICRR's full response to Treasury's consultation on Climate-related Transition Planning Guidance here.
