Three indices to address climate change risk

Global warmingThree ‘climate change’ indices will help investors that are trying to transition to a low-carbon economy, says the index provider behind the launch.

S&P Dow Jones Indices (SPDJI) has based the three products on its S&P Global 1200 index. However, depending on which climate change index is used, companies are either reweighted by their level of carbon emissions, excluded for having the larger carbon footprints, or excluded for owning fossil fuel reserves.

Julia Kochetygova, head of sustainability indices at SPDJI, says: “Many investors are trying to facilitate the transition to a low carbon economy by financing projects in the renewable energy sector, avoiding high carbon-producing companies or minimising their exposure to fossil fuel companies.”

The three indices are: the S&P Global 1200 Carbon Efficient Index Series; the S&P Global 1200 Carbon Efficient Select Index Series; and S&P Global 1200 Fossil Fuel Free Index Series.

The carbon footprint for both the Carbon Efficient and Select indices is defined as the company’s annual greenhouse gas emissions and is calculated by Trucost.

RobecoSAM conducted the research for ownership of fossil fuel reserves for the Fossil Fuel Free index.

Guido Giese, head of indices at RobecoSAM, says: “Climate change is a large and complex issue, and it is inextricably linked to many other sustainability challenges. Many investors understand that exposure to fossil fuels might create a new type of valuation risk in their portfolios.“

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