What is the Transition Pathway Initiative (TPI)?
The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by investors globally. Aimed at the investment community open access, it assesses companies’ preparedness for transition to a low-carbon economy.
What is the TPI’s purpose, and why is it needed?
The TPI was developed to enable investors to assess against internationally agreed benchmarks a company’s performance and its progress towards the low-carbon economy. Assessment is made using best-available data and publicly available company information, and an academically rigorous approach, which can be used to not only help inform investment decisions but also as a basis for engagement with companies on their progress towards specific targets.
How did the TPI come about?
The TPI was initiated by a group of asset owners – including the Environment Agency Pension Fund and National Investing Bodies (NIBs) of the Church of England which, in its May 2015 Climate Change Policy had committed to developing a tool to assess the progress of companies’ transition to the global low carbon economy.
These organisations are recognised as responsible investors and regard the issue of climate change as one of the most pressing of our times – hence seeking to build their own, and support other investors’, understanding of climate change risk and opportunity.
How is the TPI governed?
The TPI is governed by a Steering Group which consists of representatives from asset owners who are significant sponsors of the initiative. It has two Co-Chairs: one designated by the Environment Agency and the other by the Church of England Pension Board. The Steering Group is collectively responsible for the initiative’s long-term success and can co-opt further expert and other partners to ensure the diversity of views needed to achieve the initiative’s strategic objectives. TPI’s academic, data partners and secretariat representatives are ex-officio Steering Group members. Further background can be found in the TPI Governance Structure
document.How is TPI funded?
TPI is an asset owner led and mainly asset owner funded initiative. Strategic Asset Owner Partners provide the TPI with a significant amount of funding and they sit on the Steering Committee
. A few Asset Managers, TPI´s Research Funding Partners
, have also been invited by the TPI to financially support the research. Contributions to TPI during 2019 amounted to £337 000 where the vast majority, over 90% was used to finance our research team
at the LSE.
For details, see the Financial statement for FY 2019
What is the TPI’s data source / material?
The data for the management quality assessment is provided by FTSE Russell
, one of the world’s leading data providers for investors. Data for the carbon performance assessment is gathered from publicly available information. Companies are given the opportunity to check the accuracy of the data before it is used in the assessment.
What is the role of the London School of Economics (LSE)?
The LSE has devised the academic framework by which sectors and companies are assessed, and regularly carries out company assessments. LSE also hosts the TPI website and online tool.
Which other partner organisations are involved?
The London School of Economics’ (LSE) Grantham Research Institute is the TPI’s academic partner, developing the methodology behind the tool and hosting it online. The data partner is FTSE Russell, and the administrative partner is the Principles for Responsible Investment (PRI).
Which organisations are Supporters of the TPI?
To date*, over 80 investors globally are on-board as supporters, representing over $22 trillion combined assets under management and advice. A full list can be found here
. The initiative also has Research Funding Partners
, who play a further important role by enabling the research behind the TPI’s publications and their free availability.
* as of October 2020
Which sectors have been analysed?
With a focus on assessing sectors contributing most significantly to greenhouse gas emissions, over 330 publicly-listed companies across 16 high carbon sectors have been analysed to date (as of July 2020), including coal mining, oil and gas, electric utilities, autos, aviation, shipping, steel, cement, paper, aluminium and chemicals. Data on further sectors will be released in due course.
Are the analysis results publicly available?
Yes, all sector assessments undertaken to-date are available in the Publications section
of the TPI website.
How often will the tool’s data be updated?
The online tool will be updated on an annual basis to ensure the most recent available data from companies’ annual reporting is included. Updates will also be made as new sectors and performance assessments are rolled-out.
Does the TPI require companies to increase their disclosure on transition risk?
The TPI identifies gaps in data that companies should be disclosing to enable their shareholders to make informed, robust decisions about transition risk. Better disclosure is key to enabling investors to make decisions about companies’ quality of management, and is necessary for the performance assessment. Companies owe it to their investors to give them the full picture, and this tool enables that to happen.
Does the TPI mandate divestment at any point?
No. The TPI is a way of assessing companies’ performance against internationally agreed benchmarks. Any action asset owners wish to take is a decision for them, and not in any way mandated by the TPI.
Isn’t it just the “usual suspects” involved?
Risk around the transition to the global low carbon economy is a key, mainstream investor consideration and this tool allows an objective comparison to be made between companies, enabling these to be factored into investment decisions – in whichever way an asset owner or asset manager sees fit. This clarity and objectivity have been fundamental to ensuring the initiative has been bought into, and the tool adopted, by a much wider audience than just the “usual suspects”. This is demonstrated by the breadth of organisations that have already pledged their support and are using the tool.
Do other similar measurement tools exist?
Many data providers hold information on companies’ progress on carbon reduction, however, the TPI’s framework, as devised by the LSE, means the data can be used to inform engagement and bring to life in a clear and public way future individual company performance. This fills a knowledge gap for asset owners, providing a robust framework within which companies can be assessed, compared to their peers and, if appropriate, engaged with.
How does the initiative relate to other engagement efforts such as those by the IIGCC?
The TPI sits alongside other established initiatives, and we encourage the tool to be used by members of investor groups like the IIGCC to inform their ongoing conversations with companies.
How can the tool be accessed?
The tool is open access, i.e. publicly-available online and free to use here.