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C of E Pension Board launches London Stock Exchange index to monitor climate change progress

Posted on: January 31, 2020 12:37 PM
Members of the Church of England Pensions Board open trading at the London Stock Exchange last Thursday (30 January) at the launch of the new Transition Pathway Initiative Climate Transition Index.
Photo Credit: Church of England

[ACNS, by Staff Writer] The Church of England Pension Board has launched a Transition Pathways Initiative (TPI) Climate Transition Index to guide investors on companies’ progress towards alignment with the Paris Agreement on climate change. The FTSE TPI Climate Transition Index will enable investment funds to link their investments on the London Stock Exchange to the progress companies are making in line with the Paris Agreement. The move follows calls from Mark Carney, the outgoing Governor of the Bank of England, for pension funds to tackle the financial risk of climate change.

The Pensions Board has announced an initial investment of £600 million in the index, which is also backed by 62 funds with over US $18 trillion (approximately £13.75 trillion GBP) of combined assets under management or assets under advice.

The new index has been developed in partnership with the Environment Agency Pension Fund and the Grantham Research Institute at the London School of Economics.

The new index works by analysing companies which are floated on the London Stock Exchange and their performance on five key climate considerations: fossil fuel reserves, carbon emissions, green economic initiatives, mechanisms and measures to prevent, mitigate or adapt to the risks posed by climate change, and their carbon performance – an assessment of how efficiently and cleanly fossil fuels are consumed.

The index will enable investors to make environmentally responsible investments, rewarding companies with public targets aligned to the Paris Agreement whilst significantly penalising or excluding those that do not.

The launch of the index means that the Pensions Board will no longer invest in companies such as ExxonMobil, Chevron, and BP, since their emissions targets are not in line with the Paris Agreement, which seeks to keep the increase in global temperature below two degrees Celsius. The C of E Pensions Board’s Director of Ethics and Engagement, and Co-Chairman of the initiative, Adam Matthews, said: “the Church of England Pensions Board will no longer be invested in several household names in the oil industry.”

Matthews is clear, however, that if the companies set emissions targets in line with the Paris Agreement, they will be eligible for investment again. “The index leaves open a path for any one of these excluded companies to transition in line with the Paris Agreement and claim their place in the index at a later date.

“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 interests of beneficiaries and wider society and be excluded.”

The Archbishop of Canterbury, Justin Welby, said there was a moral and financial imperative to support the goals of the Paris Climate Agreement in tackling the urgent issue of climate change. “For Christians and people of conscience, this is even more so when you see the impacts on the world’s poorest and least equipped to adapt to extreme weather, as well as the impacts on the beauty of God’s creation,” he said.

The index was launched at the London Stock Exchange on Thursday 30 January with the support of representatives from other church bodies. Amongst those in attendance was the Anglican Communion’s Director of Finance, Michaela Southworth, a member of the C of E Pension’s Board.

The Pension’s Board oversees retirement funds for Church of England clergy and a number of other Church-based employees, including London-based staff of the Anglican Consultative Council, the publisher of the Anglican Communion News Service.