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    TPI Helps Investors Navigate

    Stockholm (NordSIP) – The experts at the Transition Pathway Initiative (TPI) have been working for years to detail the specific decarbonisation pathways of the high-emitting energy, transport, and industrial sectors. On 9 February, TPI published their widely anticipated consolidated report, encompassing all the pathways and methodologies produced by them so far, including their most recent 1.5 degrees one. The pathways are based on the scenarios developed by the International Energy Agency (IEA) and are publicly available for all to access.

    The decarbonisation pathways outlined by TPI are used by investors and investor networks, such as the Climate Action 100+ initiative, to assess how well the companies in their portfolios align with the Paris Agreement’s goals. They allow investors to hold companies to account for their climate commitments and understand how they are performing as we transition to a low carbon economy.

    “TPI’s sectoral decarbonisation pathways meet the demand from all stakeholders – investors, companies, civil society organisations – for a credible, rigorous framework for assessing corporate climate change performance,” writes Adam Matthews, Chair of TPI in the report. “They are recognised by investors as the authoritative translation of the IEA’s scenarios into credible performance benchmarks for industry sectors and for individual companies.”

    TPI has created sector-specific methodologies based on an approach that allocates an absolute, economy-wide emissions budget into sectoral budgets. These allocations reflect the unique challenges different sectors face from the low-carbon transition, including where emissions are concentrated in the value chain and how costly it is to reduce them. In nearly all sectors, company emissions are normalised against a physical activity output (e.g., cementitious product, electricity generation, or crude steel). This intensity metric allows for comparisons between companies.

    The decarbonisation pathways benchmark emissions in most sectors against three scenarios that are derived from modelling by the IEA, supplemented with data from other models and databases where necessary. TPI benchmarks cover most lifecycle emissions in each sector while also considering data availability issues. Non-CO2 emissions, for example, methane, are also accounted for where relevant. The benchmarks extend to 2050, allowing investors to see a company’s transition pathway in the short, medium, and long term. The benchmark methodologies are flexible and can be adapted to new models, future scenario updates, and alternative sources of scenario.

    Perhaps best of all, TPI methodologies are free to use, allowing public review and scrutiny.

    “In a world where we are faced with multiple interpretations of what the low carbon transition should look like […], it is imperative that we as investors make decisions based on credible, rigorous analysis that is explicitly focused on the goal of net zero and that reflects the economic, technical and societal realities of the low carbon transition. The TPI sectoral decarbonisation strategies provide that authoritative analysis,” concludes Matthews.

    Photo by Ed 259 on Unsplash

    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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