The Church of England Pension Board (CEPB) has allocated £600m (€712m) to an energy transition index it developed in collaboration with FTSE Russell and the Transition Pathway Initiative (TPI), which it co-chairs.According to the £2.4bn CEPB, the new index is the first global index that enables passive funds to capture company alignment to the 2015 UN-brokered Paris Agreement on climate change.On Twitter, TPI hailed the index as ground-breaking and “a catalyst for much-needed investor/passive funds’ action on climate change”.CEPB said it had worked on the development of the index over the past year-and-a-half as it sought to integrate the insights of the TPI into its passive investments. CEPB was a co-initiator of the TPI, which provides assessments of how individual companies are positioning themselves for the transition to a low-carbon economy through a public, transparent online tool. The new FTSE index embeds forward-looking data from the TPI, which tracks whether companies have public targets to align themselves with warming scenarios of 1.5°C or 2°C above pre-industrial levels.Those companies that do not have such targets are either significantly underweighted or excluded. In the oil and gas sector, for example, Shell and Respol are included in the index while BP, Chevron and ExxonMobil currently are not.“We have developed an answer that enables passive investors to play their part in supporting the goals of the Paris Climate Agreement”Adam Matthews, director of ethics and engagement for the CEPB and co-chair of the TPI Adam Matthews, director of ethics and engagement for the CEPB and co-chair of the TPI, said: “Working over the past 18 months we have developed an answer that enables passive investors to play their part in supporting the goals of the Paris Climate Agreement.“The message is clear to all publicly listed companies: put in place targets and strategies aligned to Paris and be rewarded with inclusion in the index, or work against the long term interests of beneficiaries and wider society, and be excluded.”The pension fund is keen for other asset owners to follow it with passive mandates tracking the new index.“We invite all other pension funds that are passively invested to join us […], and not to simply disinvest but incentivise companies to transition whilst having real world consequences for those that do not do so and put at risk achieving a net zero world,” said Clive Mather, chair of the CEPB.Climate metrics improvedThe £600m CEPB is allocating to the new index represents the entirety of the pension fund’s passive investments, which used to track a modified version of the MSCI world index. The carbon intensity of the portfolio has been slashed by nearly half (49.1%) as a result of the new allocation. Adam Matthews, CEPBThe index methodology leads to a 35% increase in exposure to green revenues, while exposure to fossil fue reserves and operational carbon dioxide emissions are reduced by 69% and 36%, respectively.The allocation to the new index, officially called the FTSE Developed ex-Korea TPI Climate Transition Index, comes after CEPB recently pledged to render carbon-neutral its entire portfolio by 2050 as a member of the Net Zero Asset Owner Alliance.CEPB also has a commitment that by 2023 it will have divested from all companies that, according to a TPI assessment, have not set off on a path to aligning with the goals of the Paris Agreement.CEPB runs assets on behalf of three church pension schemes.