Transition Pathway Initiative launches 1.5°C performance benchmark

It comes as the UK financial reporting regulator identified a range of reporting issues the first year of its new emissions disclosure regime

The Transition Pathway Initiative (TPI) has launched a new carbon benchmark for firms, which will allow investors to measure whether a company’s carbon performance is aligned with a 1.5°C scenario.

The 1.5°C benchmark will be its most ambitious yet, the TPI said, and will be released alongside a scenario taking into account national emissions pledges. It will be used for the first time in October when the TPI conducts its annual assessment of the energy sector. 

The TPI uses data from FTSE Russell to assess the carbon performance of a firm, as well as the quality of its transition risk and GHG emission management. Firms are then rated on a scale of 0 to 4, and their performance can be compared against sector benchmarks. 

The TPI was launched in 2017 in partnership between the Church of England and the Environment Agency Pension Fund and now boasts 108 supporters representing more than $29trn in assets under management, including CalPERS, Norges Bank Investment Management and Legal and General. Its steering committee is chaired by Adam Matthews, Director of Ethics and Engagement at the Church of England Pension Board.

Alongside releasing its new 1.5°C scenario, it will also update other TPI benchmarks including the ‘National Pledges’, building on the International Energy Agency’s STEPS scenario with national targets; and a Below 2C scenario. The National Pledges will replace TPI’s current Paris Pledges scenario. 

This comes as a report by the UK reporting regulator identified a number of issues from the first year of reporting under its new carbon reporting regime. 

The Financial Reporting Council (FRC) issued updated requirements for emissions disclosure for listed companies in 2019, as well as requiring emissions reporting for the first time from large unlisted companies and limited liability partnerships.

The report, which looked at a sample of reports by 27 firms including ten FTSE350 companies, said that there were “examples of emerging good practice”, but identified a number of issues among company reports. 

Among the issues highlighted by the FRC were eight errors in emissions and energy use reporting, including two firms which did not report their energy use as required by the regulations. 

Although not required by the new regime, fewer than half disclosed emissions targets, and three companies which had disclosed them failed to give the corresponding metrics. Only 10 firms had obtained third-party assurance, and two of these only said that the disclosures had been “audited” or “verified”, giving no further information.

The report says that the FRC saw “many examples of good disclosure”, but that there was scope for improvement. It also sets out key expectations for the 2021 reporting period, including providing explanations to readers of major commitments such as net zero or Paris alignment, and providing adequate explanations of the methodology used to calculate emissions and energy use.