Church of England Pension Board invests £600m in Paris Agreement focussed index
The FTSE TPI Climate Transition Index is the first global index enabling passive funds to capture company alignment to the Paris Climate Agreement. Developed by the Church of England Pensions Board, FTSE Russell and the Transition Pathway Initiative (TPI), the index will track if the companies are aligned to the goal of restricting global warming to or below 2 degrees Celsius.
Under the index, launched on the London Stock Exchange, the Pensions Board portfolio will have a 49.1% lower carbon intensity than its current passive allocation.
The index will reward companies aligned to these goals while underweighting or excluding those that fail to do so. In terms of climate relevant metrics, the index methodology increases exposure to green revenues by 35% while reducing exposure to fossil fuel by 69% and to operational CO² emissions by 36%.
In the much controversial oil and gas sector, Shell and Repsol are included for their climate transition goals while ExxonMobil, Chevron and BP were excluded. However, excluded companies would be considered if they set public emission targets in alignment with the Paris Agreement.
The index meets a key part of the Pension Board’s commitment to be a net zero pension fund, said Clive Mather, Chair of the Board, inviting other pension funds to consider this approach for their passive investments and in managing their climate transition risk.
Adam Matthews, director of ethics and engagement for the Church of England Pensions Board & Co-Chair of the Transition Pathway Initiative (TPI), pointed out that the message is clear to all publicly listed companies. Put in place targets and strategies aligned to Paris and be rewarded with inclusion in the Index, or work against the long term interests of beneficiaries and wider society, and be excluded, he warned.
Matthews also stressed that the Pensions Board would not invest in several household names in the oil industry. However, he added that the index does open a path for excluded companies to transition in line with the Paris Agreement.