A research group backed by some of the world’s biggest investment firms plans to help investors make sense of businesses’ climate-change plans by assessing data from 10,000 companies and making the results public.
The Transition Pathway Initiative said it plans to open a research center next year at the London School of Economics, called the TPI Global Climate Transition Centre, that will publish the assessments.
The initiative marks a major expansion of TPI’s work, pointing to investor appetite for standards and data that let them compare companies by their environmental performance. TPI currently scores about 400 companies on their management of climate change.
The group said it is supported by more than 100 investment firms representing a total of $40 trillion in assets. BlackRock Inc., the world’s largest money manager, said it joined the list of TPI backers, which include abrdn PLC, BNP Paribas Asset Management and Legal & General Investment Management.
“There’s a whole variety of ways companies set net-zero targets and commitments and it’s very hard to assess those in a consistent way,” said David Harris, head of sustainable finance products at London Stock Exchange Group PLC, which also works with TPI.
The assessments are aimed at investors constructing portfolios, but TPI said they would be freely available. Mr. Harris said making the data public will build momentum among investors and help companies understand how they are being reviewed.
“In order for companies to improve their assessments, it’s really important that you have a very high level of transparency,” he said.
More than 1,500 companies have said they plan to reach net-zero emissions, according to nonprofit groups Data-Driven Envirolab and the NewClimate Institute, but approaches vary from company to company and industry to industry. For example, some companies’ plans don’t take into account Scope 3 emissions, or greenhouse gases that come from their supply chains and the use of their products. Scope 3 emissions often represent the biggest portion of a company’s emissions.
TPI’s assessment aims to solve those problems by breaking its appraisal of a company into two parts: a review of the company’s “management quality” and its “carbon performance.”
The management-quality category scores companies on a scale of 0 to 4 via 19 questions, including whether the company has a board member or committee overseeing climate-change policy, whether it reports Scope 3 emissions and whether it links executive pay to outcomes.
The carbon-performance category compares a company’s emission progress to its industry average and tests whether its current and future targets align with the Paris Agreement to limit the earth’s warming by the end of the century to well under two degrees Celsius compared with the preindustrial era.
The data TPI’s researchers review comes from public information, such as websites, annual reports and disclosures to the not-for-profit environmental reporting platform CDP.
Stock-index operator FTSE Russell provides data to TPI for the management-quality assessments. FTSE Russell, a unit of London Stock Exchange Group, already uses TPI’s data in some climate-related benchmarks. Mr. Harris said that the London Stock Exchange is looking at launching more products that use TPI’s data.
Write to Dieter Holger at [email protected]
Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
