Transition Pathway Initiative: Explored
The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers, aimed at investors to help assess companies’ preparedness for the transition to a low-carbon economy, supporting efforts to address climate change. TPI provides a template for how asset owners, data providers and academics can work together to produce high-quality data.
This Explored series outlines the purpose and objectives of the TPI, showcases the data and research methodologies as well as highlighting key uses of the data.
Thank you very much for tuning in.This is the first of a series oftransition Pathway initiative videos filmed here at LSEG.I'm David Harris, and I'm joined bya fantastic group of people whocollectively lead the Transition Pathway Initiative.We have David, Simon, and Carmen.Now, let's start at the beginning.I remember back when a couple ofpension funds came and approachedFTSE Russell about beinga data partner for the initiative back in 2016.But right from the outset,it was an investor led initiative.And, David, you were at a pension fund that becamea very early adopter and backer of TPI.You're also now the chair of TPI.Can you tell us a bit about the objectivesfrom investors in setting up TPI?Sure. And thanks, David.I think the starting point forthe Transition Pathway Initiativewas the Paris agreement in 2015.It became clear that the companiesand assets in which pension funds and asset owners,asset managers invested in would need to transition.The problem was, we as asset owners,pension funds had no way ofknowing how they were transitioning,and what they were telling us was giving usan accurate picture of howthey were doing that transition.So what we worked together to produce was a setof data that would help us in that analysis.But we wanted that data to be freelyavailable to other users in the market.We wanted the processes that the datawere collected and analyzed to be transparent.We wanted the process to beacademically rigorous and independent,so there was no influenceon how the data were being produced.And that led us to be talkingto Simon at the London School of Economics.Thanks, David. Well, Simon,let's turn to you, but you werethere right from the start.Can you tell us about howthis all got going from your perspective,but also London School of Economicsrole within this initiative?Yes, David. Well, the London School of Economicsrole is the academic partner of TPI.We develop methodologies toassess the climate credentials of companies.We assess those companies against those methodologies.We host an open access online data tool,and we provide a range ofresources for investors to use the data,like explainers, webinars, and case studies.In terms of how it all all got started,as David has mentioned,I always like to say TPI is the best idea I never had.It was the original group ofTPI investors who came to us withthe proposition that we could bethe academic partner for the initiative.And I believe they did so because of our track recordin undertaking research intothe business and economic aspects of climate change,and also because we had a track recordof hosting online data tools.I could personally immediatelysee the value in the idea of TPI,so I was happy to help support it and get it going.Okay, well, you and your colleagues played a huge role.But why did you really want to supportthis over all the other things that you could be doing?Well, the founding purpose ofthe London School of Economics wasfor the betterment of society.And that really explains ina nutshell why we decided to get involved inthis because it was a platform for us to have an impacton the wider world beyondthe walls of academia with our research,helping to supportinvestor engagement on climate change andhelping to shift capitaltowards the transition to net zero.Thanks, Simon. Well, Carmen, Can I turn to you?So, you head up the TPI center.You're the one who actuallyoversees and makes all of this happen.Can you tell us how that happens in practice?And can you tell us about the team?Sure. The TPI center was launchedin 2022 at the London School of Economics,really in response to growing demand forthe research and product offering of the TPI.Our core strength remainsthe development of methodologies toassess various entities ortheir net zero pathways and climate action.I don't head the TPICenter one I worked very closely withSoon as research directoris the mastermind behind the whole.Project. But we also workvery closely with an advisory board,a technical board, anda committee that looks atresources and development of the center.And as demand for whatwe offer has grown, so as the team.When Simon started the projectwith David and other pension funds,they were working with less than a handful of analysts.And now the team is almost five times as big as it was.And we needed todo this because we have increased over time,the companies that we cover, the sectors,that we cover, as well asthe entities beyond corporates as such.And as Simon alluded to,we do this through forensic analysis,almost as we are known forthe high quality of the products that we offer becausethe team goes throughall publicly available informationthat various entities release,such as corporate annual reports,sustainability reports, CDP disclosures,or in the case of sovereigns,it could be public budget documents or policy documents.You can have mentioned sovereigns. Can youexplain what is the scope of coverage?And also, how does TPI connectup with climate action 100 plus?Sure. Our primary productoffering remains focused on corporates.We assess corporates on two dimensions,carbon performance, which wedo fully in house, and management quality,which we do with FTSE Russell,which looks more at the governance aroundthe target setting that companies put in place.When we talk about carbon performance,we're dealing with hundredsof companies or management quality,we're talking about thousands of companies.And as we expanded,the coverage has become trulyglobal at the moment on carbon performance,we assess 11 sectors separately.And the fact that we do sothrough emission intensity and bysector is very important to investorsbecause it allows for peer comparison.But we've also started looking at banks.We assess the largest world banks at the moment.And sovereign is a new fieldbecause that's also important toassess with the national determined contributionsthat countries are setting.It's important that investors starttracking and monitor the progressthat sovereigns do as well.So the coverage has become 360 in a way.We assess a variety of entities beyond corporates.And I'm glad you mentioned climate action 100+because this is an importantpart of the work that we do.Climate action 100+ is the largest global initiativeby investors who engage withthe biggest green gas house emitters.So when we curate forclimate action 100+ the net zero company benchmark,which assesses as the name of the initiative saysover 100 companies ontwo components disclosure andalignment with the Paris goals,and through a set of indicators,metrics, and sub indicators.And we go at a deeper levelthan what we do with carbon performanceand management quality, if you will.So we're constantly asked becausewe serve a broad community of investors.We're constantly asked formore coverage or deeper coverage.So on climate action 100+,we actually go deeper than what wedo for carbon performance and management and quality,but the assessments are complimentary, I would say.Thanks, Carmen. Well, what I'm reallyinterested in is how this all has impact.So, David, I want to come back to you,what impact do you see TPI as having?And also, how do other asset managers,asset owners get involved in this?Yeah, I think that the impact is the data are being used.So, as Carmen has just talked about the CA 100+,is a huge collaboration of investors usingTPI data to guide how they're engaging,how they're trying to influencehow companies are transitioning.But it goes beyond that. Investors are using it intheir own rights to guide their stewardship,their engagement activitieswith companies and sovereigns.Investors using it in voting.Guiding how they vote onclimate related issues at companies at their AGMs.They're integrating TPI data intotheir investment decision making process so thatthey can build transition planninginto their long term investment decisions.It's also being built into indices.There's the FTSE Russell TPI indexes,which billions of pounds are being run against.So that use ofthe data is actuallyencouraging transition, and that's what we want.The end here isa transitioning world andtransitioning companies so that we get to net zero.Reach the Paris agreement in the end by 2050.And in terms of supporting the TPI,using the data is obviously at the first point,but it is possible to also become official supportersof the TPI and more informationabout that is available on the website. www.transitionpathwayinitiative.orgWell, thanks, David. And this really has beenjust a kind of a taster and an overview of TPI.To go further and to find out more,there's a series of other TPI videosthat you can access on this web page.There's also the website that David mentioned as well.So with that, I just wanted to say thankyou to David, Simon and Carmen.
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