Just a month in to 2020 and it has been a very busy start to the year for the Transition Pathway Initiative.

A new report on the world's largest, publicly-listed Industrials and Materials companies (including, for the first time, Chemicals) has been released; last week saw the launch at the London Stock Exchange of a ground-breaking new Index - the 'FTSE TPI Climate Transition Index' - which is embedded with TPI data; and we are now working towards the third annual State of Transition Summit, taking place on 20 March and again hosted by our partners, FTSE Russell, at the London Stock Exchange. At this event, a review of all sectors' progress will be provided by Professor Simon Dietz of the London School of Economics.

Further background on these developments is below, making for quite a lot to update on this month, so we'll keep this introduction brief and simply say thank you for your continued support for the TPI's work.

Faith Ward and Adam C.T. Matthews
Co‐Chairs of the Transition Pathway Initiative ('TPI')

Release of new report on Industrials and Materials sector

For the first time, management quality assessments of the chemical sector was undertaken, showing an average score of 3. However, the largest chemical company assessed is only on level 1. The paper sector performs the worst for management quality of all the sectors covered in this report; however, it is the best performing sector on carbon performance.



We now have trend data for some of these companies following our previous assessments. The data shows that although there is sector progress, it is slow and urgently needs to be accelerated if we are to get a grip on climate change.

We can see from the trend data that 61% of companies remain on the same management quality level as last time, with 26% of companies moving up at least one level or more.

There was significant improvement in the steel industry, with the management quality level moving from 1.8 in mid-2017 to 2.4 this year. However, carbon performance for this sector has failed to improve, with only 6 out of 24 companies aligned with the Paris Pledges.

The findings tell us that disclosure has improved amongst these sectors - going from 61% to 75%, below. There is also evidence of companies setting more targets to reduce carbon emissions.

A webinar on the report's findings will be held on 13 February (4pm GMT), which will also be an opportunity to put questions to the TPI research team at the LSE. To join, please register here. 



Read the full report here and Press Release here.

Launch of important new 'Paris-Agreement' aligned Index, created using TPI data

Last week, the 'FTSE TPI Climate Transition Index’ was launched at the London Stock Exchange. A ground-breaking new product, embedded with TPI data, we were proud to be directly involved in bringing it to life.

Developed over the past 18 months, the index is a collaboration between the Church of England Pensions Board, FTSE, the London School of Economics and TPI.
 
Believed to be the first global index allowing passive funds to play an active role in supporting the Paris Climate Agreement, it is the first to embed forward-looking data from the TPI.  
 
The Pensions Board announced at the launch an allocation of £600 million of its passive investment portfolio - with an invitation to other institutional asset owners to join too.
 
The Index will reward those companies with public targets aligned to the Paris Agreement whilst significantly under-weighting or excluding those that do not. As a result, the Pensions Board will be automatically divesting from several oil companies, including Exxon and Chevron, however, it will remain invested in Shell and Repsol and any company that sets Paris Aligned targets as assessed by TPI.

At the launch, Adam Matthews, Co-Chair of the Transition Pathway Initiative and Director of Ethics and Engagement for the Church of England Pensions Board commented:

“Last month, Bank of England Governor Mark Carney challenged people to ask what their pension funds are doing to address the financial risks of climate change. Working over the past 18 months, an answer has been developed that enables passive investors to play their part in supporting the goals of the Paris Climate Agreement.

The message is clear to all publicly listed companies: put in place targets and strategies aligned to Paris and be rewarded with inclusion in the Index, or work against the long term interests of beneficiaries and wider society, and be excluded.”
 
The launch was covered by the Financial Times, New York Times, CNN and the further responsible investing press. Adam was also interviewed on BBC’s Radio 4 Today programme (from 23 minutes, 59 seconds).

A brief video of the launch can be seen here and the Church of England Press Release can be read here.

Forthcoming reports and the Third Annual State of Transition Summit