Climate change is having an ever-increasing impact on global capital markets. It presents a wide and complex range of risks from physical impacts such as flooded factories, to regulation risk such as the imposition of expected carbon taxes, litigation risk and transition risk as company cash flows and profits are affected by the move to a low-carbon economy. There is also mounting evidence that companies who care about their broader eco-systems, tend to financially outperform those who do not.
TPI’s mission is to empower investors to understand and drive the low-carbon transition by providing independent, open-access data showing whether the world’s largest high-emitting companies are adapting their strategies to align with international climate goals.
But what do investors and other organisations actually do with TPI data?
Our
TPI in Practice booklet offers a series of case studies from around the world of how investors are using TPI to enhance their investment decision-making, create new financial products and change corporate behaviour.
From ESG integration to engagement
TPI is not prescriptive about how its data can be used and does not impose any obligations on supporting organisations to use TPI data in any particular way. Investors can, and do, use TPI data in different ways to make their own decisions.
Some examples of how investors use TPI data include:
- ESG integration: Many investors want to understand whether their holdings align with the pathways set by the Paris Agreement, so build TPI data into their portfolio construction or risk management processes – as exemplified by Brunel Pension Partnership
- Active ownership: Investors use TPI’s robust data as a foundation for a broad engagement strategy or for individual corporate engagements (often with laggards on this issue). As exemplified by Robeco. TPI is also the data provider for the CA100+ initiative.
- Voting: Investors use it to shape approaches to proxy voting as exemplified by USS and abrdn
- Exclusions: Investors use it to shape a sophisticated exclusion policy as exemplified by Länsförsäkringar.
- Product creation: Investors use it to create climate-sensitive financial products that can drive more climate aware company behaviours such as the ‘FTSE TPI Climate Transition Index.
- Due diligence: Investors use it as part of investee due diligence procedures or to vet potential clients.
- Demonstrating commitment: Becoming an active member of TPI can also be a way for investors to show their beneficiaries, clients or stakeholders that their interventions as investors are meaningfully contributing to the goals of the Paris Agreement, and that they are effectively managing the risks and opportunities presented by the transition.
And although TPI was developed with investors in mind our research is also available to the corporate sector and wider civil society. For example, we are seeing corporates and civil society institutions use the data as part of corporate due diligence processes, or being used by suppliers to help them align climate policies across a global value chain.
If you would like to submit an example of how you are using TPI data please do send it to
tpi@lse.ac.uk
