Research at LSE’s Grantham Research Institute (GRI) is at the heart of a new global initiative to measure and monitor the progress of big corporations on the transition to a low-carbon economy.
Issue
A successful transition to a low-carbon economy requires a huge reallocation of capital from high-carbon to low-carbon assets. Corporations must radically reduce their carbon footprints (both from their operations and their value chains) by mid-century. Many big investors, motivated by ethical considerations, want to take a lead in driving the low-carbon transition. Others are concerned with managing their investment risks.
Approach
The Transition Pathway Initiative (TPI) is a unique partnership between a consortium of 87 big investors with US$23 trillion combined assets under management/advice, a commercial data/index provider (FTSE Russell), an international NGO (Principles for Responsible Investment) and a university (LSE).
The Transition Pathway Initiative (TPI) responds to demand from investors for data supporting their move towards a low-carbon economy. It provides comprehensive, rigorous, and impartial data about which high-emitting companies are aligned with pathways leading to global warming at, below, or higher than 2°C.
Impact
TPI has improved the quality and availability of investor data by providing independent open-access data showing whether or not the world’s largest high-emitting companies are adapting their strategies to align with international climate goals.
The very large scale of the TPI investors combined assets means the investors supporting TPI have the potential to materially affect the allocation of capital between clean and dirty assets, as well as to change the behaviour of the companies they are investing in.
TPI is also an official data-provider to the Climate Action 100+ initiative, launched in December 2017 at the One Planet Summit. The first Climate Action 100+ progress report, informed by TPI research, was published in late 2019. It found that 9% of the 161 target companies now have Paris-aligned targets.
TPI data has informed shareholder voting on company policies, for example, through the Carbon Performance Indicator and Management Quality Scores. This has helped to drive down emission in the auto industry via the use of TPI by international asset management firm, Robeco.
As well as being an important resource in its own right, TPI is also being used to support the development of additional tools promoting the “orderly transition” to a low-carbon economy. The Church of England Pensions Board, working with FTSE Russell, has used TPI data in its development of a new climate investment index. The index investment fund is designed specifically to reward those companies with public targets aligned to the Paris Agreement.
More information
Institution: London School of Economics and Political Science
Researchers: Professor Simon Dietz, Beata Bienkowska