Helping meet climate goals through index design

The Transition Pathway Initiative (TPI) was created in 2017 as a joint initiative of the National Investing Bodies of the Church of England and the Environment Agency Pension Fund. The TPI is now a global effort, led by asset owners and supported by asset managers, representing around $60 trillion in assets under management or advisement worldwide (as of March 2024).

One of the TPI’s missions is to assess the progress of corporations on the transition to a low-carbon economy. The TPI also publishes separate climate assessments for corporate bond issuers, banks and sovereigns. The TPI’s research is based on publicly available information and its assessments are free for all to use. Among those making use of TPI research and data are investors as they aim to mitigate their portfolios’ climate transition risks.

FTSE Russell, an LSEG business, is the data partner of the TPI; the Grantham Research Institute on Climate Change and the Environment, based at the London School of Economics and Political Science, is the academic partner of this collaborative initiative.

FTSE Russell co-produces the TPI Management Quality data and has created a growing range of indices incorporating a combination of data inputs from the TPI and in-house climate data sets. For example, the FTSE TPI Climate Transition Index Series reweights several global and diversified, regional or sectoral universes based on five key climate parameters, including companies’ TPI scores.

The FTSE TPI Climate Transition Index Series is designed to reflect the performance of diversified indices where constituents' weights vary to account for risks and opportunities associated with a low-carbon economy. It offers investors a solution to support their climate-transition portfolio ambitions and commitments, combining FTSE Russell’s expertise in climate data and index design with TPI analysis of how the world’s largest and most carbon-intensive public companies are managing their climate transitions.

Index constituent weights are adjusted using five parameters simultaneously: companies’ fossil fuel reserves, their greenhouse gas emissions, their exposure to green revenues, their TPI management quality scores and their TPI carbon performance scores.