A new green investment scheme launched last week by the Church of England’s investment wing is the first attempt of its kind to explicitly align pension fund investments with the Paris Agreement’s 2°C targets.
The scheme, called the Financial Times Stock Exchange Transition Pathway Initiative (FTSE TPI) Climate Transition Index, is a stock market index that assesses companies on their climate change targets, tracking their progress and rewarding those with greater levels of commitment and action. The index includes only those companies that have set targets aligned to the 2°C limit agreed at COP 21 in Paris.
The index draws its data from the Transition Pathway Initiative which assesses the forward-looking targets of all major emitting companies across 14 key sectors against the 2°C and 1.5°C of global warming. The TPI, set up in 2017 by the Church of England and run by the London School of Economics, now includes 60 big investors and controls over USD 18 trillion in assets and investment advice.
The new FTSE TPI Climate Transition Index combines this publicly available data with data from FTSE Russell to reward and incentivize those companies explicitly working toward the 1.5 and 2 degree targets.
The Church of England Pension Board will invest GBP 600 million in the index, confirming its ambitions to be a responsible investment body. This follows calls from the Bank of England for pension funds to invest against the risks posed by climate change and similar warnings from major pension fund partnerships that current approaches are "not fit for purpose."
The aim of the new index is simple: to highlight companies that have integrated strategic targets aligned with the Paris Agreement and—by their absence—highlight those that have not. As such the index draws investors’ attention to Paris-aligned companies and companies that are not. According to the index, oil and gas company Royal Dutch Shell falls into the category of Paris-aligned companies. ExxonMobil, Chevron and BP fall into the other.