S&P Dow Jones Indices (S&P DJI) has launched three new climate change index series: S&P Global 1200 Carbon Efficient Index Series, S&P Global 1200 Carbon Efficient Select Index Series and S&P Global 1200 Fossil Fuel Free Index Series.
All three index series are derived from the constituents of the S&P Global 1200.
The S&P Global 1200 Carbon Efficient Index Series is designed to measure the performance of the constituents of the S&P Global 1200, overweighting those that have lower levels of carbon emissions and underweighting those with higher levels, in their respective GICS® sectors.
The S&P Global 1200 Carbon Efficient Select Index Series is also designed to measure performance of companies in the S&P Global 1200 that have a reduced carbon footprint. The methodology excludes those companies that have the largest relative carbon footprints rather than reweighting the constituents.
The Carbon Footprint for both of the Carbon Efficient and Select Index Series is defined as the company’s annual greenhouse gas (GHG) emissions and is calculated by Trucost Plc.
The S&P Global 1200 Fossil Fuel Free Index Series is designed to measure the performance of companies in the S&P Global 1200 that do not own fossil fuel reserves. The exclusion rules are based on any use of fossil fuels, including third party and in-house power generation. With respect to coal, the exclusion relates to thermal coal only and does not cover companies which are exclusively engaged in the extraction of metallurgical or coking coal. RobecoSAM conducted the research for ownership of fossil fuel reserves.
“Climate change and its impact present a challenge from an investment perspective,” says Julia Kochetygova (pictured), Head of Sustainability Indices at S&P Dow Jones Indices. “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 minimizing their exposure to fossil fuel companies. The three new S&P DJI index series are designed to provide alternative performance narratives to standard benchmarks, being comprised of those companies meeting the strict fossil fuel and carbon efficient standards set within each index series.”
“Trucost continues to be the gold standard for comprehensive and rigorously verified carbon data,” states Neil McIndoe, Head of Environmental Finance at Trucost Plc. “Taking account of companies’ operational and often more significant supply chain’s carbon exposure ensures a robust approach to risk reduction. We are delighted to continue our long-standing collaboration with S&P Dow Jones Indices by providing the data to create new indices which offer investors significantly lower carbon exposure and benchmark financial performance.”
“Climate change is a large and complex issue, and it is inextricably linked to many other sustainability challenges,” says Guido Giese, Head of Indices at RobecoSAM. “Many investors understand that exposure to fossil fuels might create a new type of valuation risk in their portfolios. The S&P Global 1200 Fossil Fuel Free Index Series was developed for investors who want to address exactly this new risk.”