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Climate ultimatum presented to oil giants

30 January 2020

New £600m stock index tracks Paris Accord alignment


From left: Alan Heath, Jen Witts, and Sian Vaughan glue themselves to the London Stock Exchange in the City of London, last April, as part of Extinction Rebellion protests

From left: Alan Heath, Jen Witts, and Sian Vaughan glue themselves to the London Stock Exchange in the City of London, last April, as part of Extincti...

THE Church of England Pensions Board will partially no longer invest in ExxonMobil, Chevron, and BP, unless they set carbon-emissions targets that are in line with the Paris Agreement on climate change.

The Pensions Board has invested £600 million in a new stock index — the FTSE TPI Climate Transition Index — that “will reward companies with public targets aligned to the Paris Agreement whilst significantly underweighting or excluding those that do not,” a statement said.

The index, which the Archbishop of Canterbury has described as “world leading”, was launched at the London Stock Exchange on Thursday.

Developed by the C of E Pensions Board in collaboration with FTSE Russell, the index enables investment funds to link their investments to the progress that companies are making in line with the Paris Agreement. It builds on the work of the Transition Pathway Initiative (TPI) (News, 13 January 2017).

A spokesman confirmed that 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 2ºC. If the companies set emissions targets in line with the Paris Agreement, they will be eligible for investment again.

The Pensions Board will continue to invest in Shell and Repsol, since their emissions targets are aligned to the Paris Agreement.

Last month, the outgoing Governor of the Bank of England, Mark Carney, challenged pension funds to respond to the financial risk of climate change.

Archbishop Welby said: “We all have a responsibility, both moral and financial, to address the climate emergency and to use those tools available to us to support the goals of the Paris Climate Agreement.

“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 that the index was world-leading by “demonstrating that it is possible to act, to take leadership, and in doing so challenge the market that is currently aligned to a world of 3.8 degrees of warming”.

The new index uses the TPI’s “carbon-performance metric”, which assesses a company on its plans for aligning the transition to a low-carbon economy, and excludes companies that do not align with the Paris Agreement’s aims.

The Pensions Board said that its portfolio will have “a 49.1-per-cent lower carbon intensity than its current passive allocation”. Passive investing is a strategy in which portfolios match an index automatically, maintaining diversification of stocks, but without having actively to manage funds.

Clive Mather, who chairs the Pensions Board, said: “This is an industry-leading undertaking on behalf of our beneficiaries to address the financial risks within our passive investments posed by companies that are not addressing climate change.

“It will allow the Pensions Board to deliver on a large part of our 2023 commitment to the General Synod of the Church of England to have disinvested from those companies, assessed by TPI, that have not set themselves on a path to alignment with the Goals of the Paris Climate Agreement.”

Last week, it was announced that the C of E’s national bodies would invest only in companies that were working towards net zero carbon emissions by 2050 (News, 24 January).

Working poor. Six and a half million people are now part of the “working poor” in the UK, a study by the Financial Inclusion Alliance says.

It says that there are now more working people living in poverty than there are those who are unemployed, and that businesses should start to prioritise financial inclusion.

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