The Church of England’s investment arm has launched a ranking of energy companies’ progress on transitioning to low carbon.
The initiative is being spearheaded in collaboration with the Environment Agency, LSE’s Grantham Research Institute and investors including Standard Life, BNP Paribas and Aviva Investors who together control over £2 trillion in assets.
The Transition Pathway Initiative (TPI) looks to help asset owners make investment decisions by giving them clear information about how companies with the biggest climate impacts are changing their business models away from high carbon intensity.
The scheme focuses on companies in the oil and gas, mining and electricity generation sectors.
The TPI was launched with findings of its first 40 companies which have been given a ranking from zero to four, from not recognising climate change as an issue to setting long term quantified emissions reduction targets. Just one on the list is yet to acknowledge climate change as a concern – US fracking firm Pioneer Natural Resources.
Italian electricity company Enel was among those given the top score of four, which acknowledges significant commitment to climate mitigation. This comes off the back of Enel’s recently announced €1.25 billion green bond which will be used for developing new renewable power plants.
NextEra Energy, which claims to be the world’s largest generator of renewable energy from wind and solar, was awarded level two – given to companies which have set some emissions reduction targets but haven’t committed to quantified targets or emissions data verification.
Adam Matthews, head of engagement for the Church of England pensions board, said the initiative would be “a tipping point for the market”. He added: “The Initiative will identify companies that are aligned with the transition to the low-carbon economy and those most exposed to climate transition risk.”
The TPI is led by the Church of England’s National Investing Bodies and the Environment Agency Pension Fund in partnership with the Grantham Research Institute at the London School of Economics, with data from FTSE Russell.
Emma Howard Boyd, chair of the Environment Agency, said: "Businesses should be able explain to investors how they plan to manage climate change risks, invest and innovate on the way to the zero-carbon economy of the future.
“With the launch of the Transition Pathway Initiative, asset owners from around the world are sending a strong signal that portfolios will align in the future with companies that are taking the transition to a low carbon economy seriously."