The asset owners backing the Transition Pathway Initiative (TPI), an initiative of the Church of England’s National Church of England’s National Investing Bodies and the Environment Agency Pension Fund, were made public today at an event launch at the London Stock Exchange.
According to the TPI promoters, asset owners behind the initiative, as well as supporting asset managers, represent all together more than £2trn in assets.
Described as a “global initiative by asset owners for asset owners” the TPI is a free tool that aims at tracking and analysing how companies are transitioning to a low carbon economy, in order to make investment decisions accordingly.
The initiative was first introduced at the RI Europe event last June.
TPI’s partners, the London School of Economics’ Grantham Research Institute and FTSE Russell, have carried out the technical aspects of the initiative
At the launch event, Simon Dietz, Co-Director, Grantham Research Institute explained that so far the TPI has assessed 40 companies on a preliminary basis from high-impact sectors such as extractive industries, electricity utilities and heavy manufacturing emitters.
The methodology classifies companies in four levels depending on their approach to climate change: from level 0 or unaware/not acknowledging it, to level 4 or strategic assessment of climate change.
Dietz said a second element of the TPI tool, currently in preparation, will be a carbon performance assessment of companies, which would allow to benchmark companies against two emissions paths: a 2 Degrees scenario and a Paris Pledges scenario.
Asked by RI about the integrity of the data used by the TPI tool, he said that from a scientific point of view he is satisfied with the data provided by FTSE Russell.
David Harris, Director, FTSE ESG Information Services told RI that such data provided to the Grantham Research Institute is based on publicly available information published by companies, rather than obtained via private surveys.
Adam Matthews, Co-Chair of the TPI and Head of Engagement for the Church Commissioners and Church of England Pension Board, highlighted that the TPI has tried to be in line with existing initiatives, particularly that of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).
In that respect, Emma Howard Boyd, the Chair at the Environment Agency, suggested that the TPI is the asset owner community’s action response to the TCFD’s work, as they should “know what’s going on in their portfolios”.She said that the Environment Agency Pension Fund, with more than 40,000 beneficiaries and liabilities stretching for at least half a century, has an interest in understanding the risks and opportunities that climate change poses.
She said that the TPI will evolve, potentially being joined by more asset owners.
The tool is free and publicly available and its use is encouraged “across the whole investment chain”, said Faith Ward, Co-Chair of the TPI and Chief Responsible Investment and Risk Officer at the Environment Agency Pension Fund.
In conversation with RI, Nadine Viel Lamare, Head of Sustainable Value Creation at Swedish pension fund AP1, highlighted that the TPI’s tool will provide asset owners with useful information, obtained independently and using a scientific approach.
Such information will be valuable to engage and invest in companies “fit for the future”, Viel Lamare said.
Barbara Boigegrain, General Secretary and Chief Executive Officer at US faith investment group Wespath, told RI that the TPI sends a clear message to companies: that asset owners are actively monitoring corporate approaches to serious long-term issues such as climate change.
She also said that, in terms of stewardship, the TPI can help shape the way in which asset owners communicate their activity to beneficiaries and other stakeholders.
Susan Gostick, Head of Pension Segment at BNP Paribas, stressed the fact that it’s a free tool available to everyone, thus being useful for asset owners that don’t outsource or obtain in-house such data.
The founding members of the TPI:
-Church Commissioners for England
-Church of England Pensions Board
–CBF Church of England Funds
-Central Finance Board of the Methodist Church
-Environment Agency Pension Fund
-Local Authority Pension Fund Forum
-Three Swedish National Pension Funds (AP1, AP3 and AP4)
-Wespath Benefits and Investments
-West Midlands Pension Fund
Supporting asset managers:
–BNP Paribas Investment Partners
-Hermes Investment Management
-Standard Life Investments