Transition Finance Data: Insights from the TPI Centre
In July, the Luxembourg Stock Exchange (LuxSE) announced the launch of a brand-new initiative which aims to support issuers in their transition journey and provide transparency to investors. The Transition Finance Gateway shines the spotlight on the exchange’s some 500+ non-financial corporate debt issuers across both conventional and sustainable bonds.
To mark the launch of our innovative Transition Finance Gateway, we sat down Carmen Nuzzo, Professor in Practice and Executive Director, Transition Pathway Initiative (TPI) Centre at the London School of Economics and Political Science - one of the four data providers helping to power the Gateway with market-renowned climate transition data.
The investor initiative, TPI, was created in 2017 by a group of asset owners who wanted to understand how companies were managing the transition to a low-carbon economy. It is now a global initiative with over 150 investor supporters and more than USD 80 trillion in assets under management and advice. [1]
To promote disclosure, transparency and accountability, the TPI Centre uses only publicly available information to conduct entity assessments and its resources are open access. The TPI Centre will expand its research in 2025 to assess:
In addition, through our award-winning Net Zero Standards, we assess how companies in high-emitting sectors translate climate commitments into concrete transition planning. Building on the TPI Centre’s Management Quality and Carbon Performance, these assessments offer a deeper evaluation of companies in high-emitting sectors, focusing on capital expenditure alignment, the robustness of emissions reduction targets, and the integration of climate considerations into corporate strategy.
The TPI Centre has influenced financial decision making on net zero by promoting forward-looking analysis and target alignment in climate finance. Competing approaches, which often emphasise simply reducing financed emissions to net zero, are susceptible to gaming through portfolio decarbonisation without driving real-world emissions reductions. Our granular forward-looking analysis strengthens investors’ capacity to mobilise transition finance, drive actual improvements in climate action and hold companies accountable.
Investors can leverage the data in many ways, including, but not limited, to:
[1] Assets under management and advice are subject to market-price and foreign-exchange fluctuations. As the sum of self-reported data by TPI supporters, they may double-count assets.
To mark the launch of our innovative Transition Finance Gateway, we sat down Carmen Nuzzo, Professor in Practice and Executive Director, Transition Pathway Initiative (TPI) Centre at the London School of Economics and Political Science - one of the four data providers helping to power the Gateway with market-renowned climate transition data.
History
Established in June 2022, the Transition Pathway Initiative Centre (TPI Centre) is an independent and authoritative source of research and data into the progress being made by corporate and sovereign entities in the low-carbon transition. Based at the London School of Economics and Political Science (LSE), the TPI Centre is the academic partner of the Transition Pathway Initiative (TPI), a global investor initiative led by asset owners and supported by asset managers. The TPI Centre is also the academic research expert of the Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) project. The Centre is uniquely positioned between academia and financial sector practice to translate climate science and economics into investment decision-useful tools.The investor initiative, TPI, was created in 2017 by a group of asset owners who wanted to understand how companies were managing the transition to a low-carbon economy. It is now a global initiative with over 150 investor supporters and more than USD 80 trillion in assets under management and advice. [1]
Current research projects and data
The TPI Centre develops detailed and transparent assessment methodologies, including Carbon Performance, Management Quality and Net Zero Standards to evaluate corporate entities, the Net Zero Banking Assessment Framework to evaluate banks and the ASCOR Framework to evaluate sovereigns.To promote disclosure, transparency and accountability, the TPI Centre uses only publicly available information to conduct entity assessments and its resources are open access. The TPI Centre will expand its research in 2025 to assess:
- More than 4,000 companies in hard-to-abate sectors for their climate governance using the Management Quality framework
- 560 companies in 13 hard-to-abate sectors for their emissions pathways using the Carbon Performance methodologies
- 26 major international banks and over 10 banks with high exposure to emerging markets under the Net Zero Bank Assessment Framework and Carbon Performance Alignment Matrix
- 85 countries under the ASCOR framework
The TPI Centre has influenced financial decision making on net zero by promoting forward-looking analysis and target alignment in climate finance. Competing approaches, which often emphasise simply reducing financed emissions to net zero, are susceptible to gaming through portfolio decarbonisation without driving real-world emissions reductions. Our granular forward-looking analysis strengthens investors’ capacity to mobilise transition finance, drive actual improvements in climate action and hold companies accountable.
Investor use cases of our data
The TPI Centre’s research and data has tangible outcomes, supporting investors in the management of climate transition risk and increasing financial flows towards low-carbon investments. This impact is demonstrated through case studies that we regularly publish. Our data are increasingly integrated into key investor practices and products, including the Net Zero Investment Framework, and are at the core of FTSE TPI Climate Transition Index series.Investors can leverage the data in many ways, including, but not limited, to:
- Risk assessment: Expose transition risk hotspots in portfolios
- Investment decisions: Identify opportunities across sectors and geographies
- Portfolio alignment: Reach own climate targets
- Active ownership: Engage with investee entities and proxy voting
- Product creation: Create climate-sensitive financial products
- Screening and exclusion: Exclude or include investee entities
- Reporting and compliance: Support voluntary and regulatory disclosures
- Show of commitment: Demonstrate own commitment to the Paris Agreement
Issuer use cases of our data
Our data can support corporate and sovereign issuers interested in the net zero transition in a variety of ways, including, but not limited, to:- Benchmark performance: Compare own climate performance against industry standards and peers
- Develop transition strategies: Use methodologies and assessment results to inform own decarbonisation strategies
- Enhance transparency: Improve reporting and transparency on own climate-related risks and opportunities
- Assess climate performance: Evaluate the climate performance of companies in hard-to-abate sectors with which the issuers do business
- Support engagement efforts: Inform discussions with investors on their climate ambition and action
- Navigate sovereign and regional assessments: Combine the TPI Centre’s corporate and sovereign assessment data to understand climate-related opportunities and risks in countries in which the issuers operate
Future of financing the net zero transition
Transition finance has evolved rapidly in the last few years and remains a creative space. Yet, we are well short of the pace required to reach the USD 125 trillion needed to achieve the 2050 climate goals. It is about financing clean energy solutions but also greening hard-to-abate sectors and supporting them whilst they change business models. This is not a game that can be won single-handedly and requires not only private investments but also public funding and a supportive policy environment. The key is the collaboration among different stakeholders and the getting the sequence of their actions right to get funds flowing where they are needed the most.One “call to action” for issuers
Don’t be afraid of change. The transition towards net zero is a dynamic process that needs transformation. It requires actionable plans that are not set in stone but need adapting over time. Therefore, don’t be put off by starting this journey and embrace the opportunities that it brings: it is not a trade-off with growth, it is about a new model of growth.[1] Assets under management and advice are subject to market-price and foreign-exchange fluctuations. As the sum of self-reported data by TPI supporters, they may double-count assets.
