A new index, developed by the Church of England Pensions Board in collaboration with FTSE Russell and the Transition Pathway Initiative (TPI), will enable passive funds to invest in companies aligned to the Paris Climate Agreement.

The FTSE TPI Climate Transition Index, launched at London Stock Exchange with £600m allocation from the Church of England Pensions Board, is claimed as the first index to embed forward looking data from the London School of Economics hosted Transition Pathway Initiative (TPI) to track whether companies align to 2C or below 2C/net-zero. The Index will then reward those companies with public targets aligned to the Paris Agreement whilst significantly underweighting or excluding those that do not, and under the index, the Pensions Board portfolio will have a 49.1 per cent lower carbon intensity than its current passive allocation.

For example, in the oil and gas sector, and based on TPI assessments, Shell and Repsol are included in the index whilst ExxonMobil, Chevron and BP are not. Were the latter companies to set emissions targets covering all their emissions that align to the Paris Agreement then the Index rules would allow inclusion.

The development of the Index has been an important project of the Church of England Pensions Board over the past 18 months as it seeks to integrate the insights of the Transition Pathway Initiative (TPI) into its passive investments.

The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers and is co-chaired by the Church of England Pensions Board and the Environment Agency Pension Fund in partnership with the Grantham Research Institute at the London School of Economics. Data has been provided by FTSE Russell.

Justin Welby, Archbishop of Canterbury commented: “We all have both a moral and financial responsibility to address the climate emergency and to use those tools available to us to support the goals of the Paris Climate Agreement.”

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