Some of the UK's biggest pension schemes have co-founded an initiative to understand how the transition to a low carbon economy affects their investments.

The Transition Pathway Initiative (TPI) is being led by the Church of England's National Investing Bodies, including its pension board, and the Environment Agency Pension Fund (EAPF).

TPI is designed to develop a comprehensive framework for engagement on climate change.

It will assess how individual companies are positioning themselves for the transition to a low-carbon economy through a public transparent online tool.

Preliminary assessments include the oil, gas, and electricity utilities sectors.

Carbon performance assessments of additional sectors and individual companies will follow in the coming months.

Thirteen asset owners with £370bn assets under management (AuM) co-founded the TPI, including the UK's Local Authority Pension Fund Forum, RPMI Railpen, Universities Superannuation Scheme and West Midlands Pension Fund.

Other founding members include Church Commissioners for England, the Central Finance Board of the Methodist Church, three Swedish national pension funds, and Wespath Benefits and Investments.

Adam Matthews, co-chair of the initiative and head of engagement for the Church commissioners and Church of England Pensions Board, said the Transition Pathway Initiative is a tipping point for the market.

"The Initiative will identify companies that are aligned with the transition to the low-carbon economy and those most exposed to climate transition risk.

"There can be no doubt about the seriousness with which asset owners are taking account of this risks and it will be a key feature in the discussions we will be having with companies over the coming years."

The TPI's preliminary results indicate that although most companies acknowledge climate change as a business issue, few are doing strategic assessment.

Electricity utilities are marginally more advanced than oil and gas producers.

First published 12.01.2017

Lindsay.sharman@wilmingtonplc.com