June 28, 2023

Deliberate decarbonisation: Measuring transition intent with TPI MQ scores

Management measures adopted by companies to reduce emissions can take several years before producing real world reductions. Investors, therefore, need a way to measure the quality of climate transition commitments and management to complement emissions-based metrics.

What our research means for investors

We examine the relationship between the Management Quality (MQ) scores of the Transition Pathway Initiative (TPI) among FTSE All-World Index constituents and annualised changes in their scope 1 and 2 carbon intensity and absolute emissions. Our analysis demonstrates that, all else equal, companies with high TPI MQ scores:

  • are more likely to reduce their emissions
  • deliver larger emissions reductions than those with low TPI MQ scores

This shows that the TPI MQ scores provide a gauge of management’s decarbonisation intent, which is a valuable signal for future decarbonisation. This makes the scores a useful tool for investors to identify companies that may not yet be delivering emissions reductions, but that are well positioned to do so in the future.

Points of differentiation:

  • The MQ scores of the TPI are based on a transparent and robust assessment methodology that can serve as a data-led input into the dialogue between investors and management on transition strategies.
  • Data for nearly 600 companies is currently available free-of-charge on the TPI website for a wide set of use cases. In addition, FTSE Russell calculates TPI MQ scores for more than 7000 companies, covering 89% of constituents in the FTSE All-World Index and over 94% of the index’s market capitalisation by the end of 2022.
  • With more than 130 investors having pledged their support for the TPI globally, representing over $50 trillion in combined assets under management and advice, the TPI MQ scores are now among the most used tools for assessing climate transition management among the investor community.