Collaborations on climate-focused passive index and mining safety named as top integration and stewardship projects.
A joint initiative by the Church of England Pensions Board (CofE), the Transition Pathway Initiative (TPI) and index provider FTSE Russell has been named ESG Incorporation Initiative of the Year in the Principles for Responsible Investment’s 2020 awards.
The CofE also partnered with the Council on Ethics of the Swedish National Pension Funds for the Investor Mining and Tailings Safety Initiative, which picked up the PRI’s Stewardship Project of the Year award for 2020.
The winners of the ESG Incorporation award sought to embed forward-looking data from the TPI into an index that could serve the financial and climate objectives of the CofE, but also be used by the wider market to support investor stewardship, corporate engagement and a transition in line with the goals of the Paris Climate Agreement.
Launched in January 2020, the FTSE Developed TPI Climate Transition Index provides investors with benchmarks “informed by cutting-edge analysis” which support alignment of a broad equity portfolio with climate transition, the goals of the Paris Agreement, and the recommendations of the Task Force for Climate-related Disclosures (TCFD). The Index’s methodology includes tilts and rules linked to the Paris Agreement.
The CofE is moving its £600 million passive developed equity mandate to track the index, supporting the Pension Board’s objective of aligning its fund with the goals of the Paris Agreement.
The index is the first forward-looking equity index to enable passive funds to capture company alignment with climate transition. It combines FTSE Russell’s climate data and index design with TPI’s analysis of how large, carbon-exposed public companies are managing the climate transition.
The index takes into account factors such as coverage, liquidity and transparency. Using FTSE Russell’s tilt-based multi-factor methodology, company engagement on climate change improves their TPI score, which increases their weight in the index, thus increasing inflows.
Climate parameter adjustments including fossil fuel reserves, carbon emissions, green revenues, TPI Management quality and TPI Carbon performance allow the index to capture the risks and opportunities arising from climate transition, while also adjusting exposure to companies based on TCFD-aligned climate governance, and commitments to two-degrees Celsius (2DC) carbon emission pathways.
The Church of England Pensions Board and the Council on Ethics of the Swedish National Pension Funds used direct shareholder engagement with mining companies to ensure that lessons were learned from the 2019 Brumadinho disaster in Brazil, which killed 270 people. The co-founders were driven by a desire to make sure that the systemic risk posed by waste in the mining sector was properly understood and addressed.
The Investor Mining and Tailings Safety Initiative was founded in response to the 2019 Brumadinho disaster in Brazil, where a mining tailings (waste) dam collapsed and killed 270 people. Supported by 114 investors with more than US$14 trillion in assets under management, the initiative used direct shareholder action at mining companies in order to better address the sector’s system risks in future.
Despite previous similar disasters, the mining industry had established no global record of the locations of tailing dams, nor standards of operation. The initiative has brought about systemic change to save lives, avoid environmental depredation and prevent destruction of company value through a number of interventions.
An independent Global Tailings Review has been established with the support of the International Council on Mining and Metals (ICMM), PRI, and the United Nations Environment Programme (UNEP). An urgent disclosure request was made to 727 listed extractives companies across the world to disclose the location of each tailing dam facility. A global database was established at GRID-Arendal, a UN-backed research company, to drive performance and best practice. Lastly, a global 24/7 alert system was established to enable the identification and removal of the most dangerous dams.
In other categories, MSCI’s ‘2020 ESG Trends Project: What Are the Big Challenges for the New Decade?’ won the ESG Research Report of the Year. The report identifies ten challenges MSCI felt would leave an impression on the investment landscape over the new decade. The project incorporated digital and visual means to represent ESG data points to showcase how they were useful in explaining the challenges investors are likely to face in the coming decade.
Finance in Motion’s ‘Green for Growth Fund’ (GGF) won the award for the Real-world Impact Initiative of the Year. The GGF is an impact investment fund that promotes sustainable economic growth and mitigates climate change. This is done by investing in measures that reduce energy consumption, resource use and CO2 emissions in the European Neighbourhood Region, across Southeast Europe, the Caucasus, and the MENA region. It invests directly in renewable energy projects, or through local intermediaries. The GGF target countries in dire need of investment.
The PRI Awards recognise individually excellent projects conducted by signatories across all sizes, areas of speciality and levels of development. Projects were nominated by signatories and assessed for innovation and impact by an independent panel of judges.