An initiative of the investment bodies of the Church of England and the Environment Agency Pension Fund has launched an online tool designed to help asset owners better understand and address their exposure to risks and opportunities stemming from climate change.
Launched today, the Transition Pathway Initiative (TPI) is also backed by Swedish AP funds, Denmark’s PKA and other asset owners and asset managers, with more than £2trn (€2.3trn) in assets under management.
The core of the TPI is a publicly available online “toolkit” that relays how companies have been assessed with respect to the quality of their management of the greenhouse gas emissions associated with their business, and how companies’ planned or expected future “carbon performance” compares with maximum warming trajectories set out in the Paris Agreement on climate change.
The Grantham Research Institute on Climate Change and the Environment, part of the London School of Economics, is the academic partner, developing the assessment framework and hosting the tool on its website.
FTSE Russell is the data partner.
The initiative aims to drive better public reporting by companies on climate change to help close a “data gap” that asset owners say impedes their ability to assess their exposure to risks and opportunities stemming from climate change and the fight against it.
The tool also aims to be useful to asset owners’ engagement, both with companies and asset managers.
A particular concern was for the tool to be designed to be useful to asset owners with relatively few resources or little expertise on climate change.
Simon Dietz, co-director at the Grantham Research Institute on Climate Change and the Environment, said the toolkit was designed with ease of use and transparency “very much in mind”.
Another important consideration in the development of the framework was for it to link to or build on existing initiatives or disclosure frameworks, such as that of the CDP and the framework proposed by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.
At a launch event today, pension investors gave an indication of the tool’s use to them.
Nadine Viel Lamare, head of sustainable value creation at Sweden’s AP1, said the AP funds wanted to invest in companies that were “fit for the future”, but that it was difficult to make well-informed decisions at the moment given a lack of information, or information being difficult to access.
“In terms of carbon management, this tool will help us identify the companies that are ready, or maybe not future-proof but at least working in the right direction,” she said.
“The tool fills an important information gap. We will predominantly use it for our investment decisions, but, of course, the tool is very handy for when we want to engage with the companies.”
Liz Fernando, head of equities at the UK’s Universities Superannuation Scheme, made similar points, saying the TPI would give the scheme a tool “to assess management’s seriousness” on dealing with climate change and a way of measuring and monitoring management’s follow-through on their statements.
“It will give us a better set of information on which to make decisions, and we think by having better information we will ultimately make better investment decisions and generate better investment returns,” she said.
The initiative is initially focusing on companies in sectors that have the most impact on climate change and are the most exposed to the low-carbon transition, such as oil and gas, mining and electricity generation.
The first set of data was released this month, representing the “Management Quality” assessments for 40 large companies in the oil and gas sector and the electricity utilities sector.
Further assessments are due to be released in 2017.
The TPI tool can be found here.
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