Industry Updates

Church of England invests £600m in FTSE Climate index

George Geddes

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FTSE Russell has collaborated with the Church of England Pensions Board for the creation of a transitioning climate index.

The FTSE TPI Climate Transition index is the first global index to incorporate transition pathway initiative (TPI) analysis to determine a company’s alignment with climate transition.

The Church of England Pension Board will be allocating a £600m mandate tracking the index, supporting the Board’s objective of aligning its fund with the Paris agreement.

In its bid to encourage companies to become more sustainable, the Pensions Board has said it will no longer be investing in several big names in the oil industry.

The index is designed to incorporate five separate sustainable investment data inputs from a combination of TPI analysis and FTSE’s climate framework.

The data inputs include:

  • Underweighting companies with fossil fuel reserves

  • Overweight companies generating revenues from a ‘green’ economy

  • Over or underweight companies depending on their carbon emissions

  • Over or underweight companies based on the extent they are managing the risks of a low-carbon transition

  • Over or underweight companies based on what extent they are committed to carbon emission pathways that are aligned with 2°C warming scenarios.

The index is the first product launched within FTSE Russell’s new generation of climate indices however, it also launched a European climate risk government bond index earlier this month.

Other index providers, including S&P Dow Jones Indices and MSCI, have also launched climate change index concepts as a result of the European Union's new standards on climate change.

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Adam Matthews, director of ethics and engagement for the CoE Pensions Board, said: “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 of interests of beneficiaries and wider society and be excluded.

“The index leaves open a path for anyone of these excluded companies to transition in line with the Paris Agreement and claim their place in the index at a later date.”

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