How FTSE Russell uses TPI data for its climate index framework

Head of Sustainable Investment Equity Index Product at FTSE Russell, Solange Le Jeune, provides an outline of key challenges investors are facing and how FTSE Russell is working with TPI to create indices that are focused on the climate transition.

Hello. My name is David Russell,and I'm pleased to welcome Sindhu fromPhoenix and Sophia from the Church Commissioners.Today we will explore how investors are usingthe transition pathway initiative orTPI data in their investment processes.Sindhu, stewardship is a really important partof any investment strategy.Can you tell me how Phoenix areusing TPI data in their engagements?Thank you, David. As you said, as an asset owner,stewardship is a very big factorfor us, a key leaver for us.We vote via asset management partners.In addition to asset management partners, on engagement,we do direct and collaborative engagement as well,and that's why TPI isa key input for us to understand companies.We have a list of top 25 companies froma finance dimission perspective and a key source of data.Our asset management partners also rely on TPI, again,for their own engagement purposes,so it forms a key part ofthe process when it comes to engagement.Thank you. And Sophia,how do you measure how well engagements are working?They're actually having an impact.Yeah, we also havean engagement program which we set up around TPI data.So we set a five year fixed term engagement program thatran from 2018 and finished last year in 2023,where we set hurdles for companies based on TPI data.So that could be the management quality scoreor it could be set pathways,where we said ifCompany A does not meet our requirements,but, for example, 2021,we would exclude those companies.So we used it as an escalation to measure where wewere in the engagement and where theywere in the Paris alignment.Okay, thank you. And voting isanother key tool thatinvestors can use in influencing companies.Can you tell me how to useTPI data in your voting process?Yes. So we use it in two different ways.So we look at we have a focus groupof companies that are the companiescovered by Climate Action 100,where we look at whether theyare aligned with the Paris agreement,and we use TPI data for that.We vote against chairs,in companies where we don't see enough Paris Alignment,and we use the management quality score.So we have a minimum level for that,as well as Paris Alignment or alignment withthe two degree pathway as set out byTPI in either the short or the long term.Great. Thank you. And Sindhu,can you tell us how you integrateTPI data into your investment processes?We're looking at the number ofoptions at this stage, David.But I think what I really like froman asset owner perspective isthe optionality that is being offered,not just as we discussed with Sophia,the engagement side of things,but also indices which have gotTPI as part of the investment decision process.So as an asset owner,there is the investment portfolio constructionthat you get from the index,but also you have the engagement as well.So that is a very interesting opportunitythat we like as an asset ownerand reviewing in close detail.Thank you, Sindhu. Thank you, Sophia.So as you can see, TPI data arebeing used by investors in a number of different ways,all of which have the end goal ofencouraging companies to transition.More information and case studiesare available on the TPI website.

Solange Le Jeune, Head of Sustainable Investment Equity Index Product, FTSE Russell