Climate transition indexes to help clients integrate climate considerations into decision-making

London Stock Exchange Group (LSEG) is a leading provider of financial markets infrastructure, offering financial data, analytics, news, and index products. LSEG provides a wide range of services to meet customer demand to enable the financial industry and community to integrate climate and net zero considerations into financial decision-making and capital raising. One of these services is the FTSE TPI Climate Transition Index Series. It is a family of equity indices that capture company-level assessments by the Transition Pathway Initiative (TPI) and improve exposure to carbon and green revenues: - The core company assessments TPI publishes are Management Quality (MQ) and Carbon Performance (CP). These forward-looking assessments evaluate a company’s climate governance and management of climate risks and opportunities (MQ scores), and the strength of a company’s targets/commitments to decarbonize based on sector-specific pathways (CP assessments). - The FTSE TPI Climate Transition Index Series integrates MQ and CP assessments directly into its index design, providing investors with a benchmark that reflects company alignment with the climate transition. The TPI index series also adjusts exposure to carbon emissions and reserves and green revenues and applies baseline exclusions. - The five different LSEG Climate Assessment Metrics (management quality, carbon performance, carbon emissions, green revenues and fossil fuel revenues) are applied in the index, which are used to overweight and under-weight constituent companies. The weightings of these can also be customized. The FTSE TPI Climate Transition Index Series — and other climate index families that also use TPI data — have seen broad adoption since they were launched in 2020. Investors are attracted to the FTSE TPI Climate Transition Index Series as a method to align their portfolios to the climate transition for various reasons, including: - The transparent methodology and public data inputs of TPI assessment frameworks allow investors to tailor their engagement to target specific KPIs and areas of improvement for their investee firms (from risk management procedures to emissions exposure and reduction targets). - The use of multiple metrics in a “dashboard approach” reduces the reliance on any one KPI or indicator and further adds flexibility to investor engagement strategy. - Frameworks are used where they are most applicable; for instance, for companies in high-emitting sectors, the TPI Carbon Performance assessments deliver granular assessments using comparable sector-specific KPIs, evaluating company targets against climate scenarios.