S&P Dow Jones Indices (S&P DJI) has announced the launch of 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 measuring the performance of the S&P Global 1200’s constituents. It overweights those that have lower levels of carbon emissions and underweightsg those with higher levels, in their respective sectors.
It also aims at measuring performance of companies in the S&P Global 1200 that have a reduced carbon footprint. The methodology excludes companies that have the largest relative carbon footprints rather than reweighting the constituents.
The carbon footprint, calculated by Trucost, is defined as the company’s annual greenhouse gas (GHG) emissions for both of the Carbon Efficient and Select Index Series.
The S&P Global 1200 Fossil Fuel Free Index Series measures the performance of companies in the S&P Global 1200 that do not own fossil fuel reserves. The exclusion rules rely on any use of fossil fuels, including third party and in-house power generation.
As for coal, the exclusion relates to thermal coal only. It 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,” said Julia Kochetygova, 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.” she added.
Guido Giese, head of Indices at RobecoSAM, commented : “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. The S&P Global 1200 Fossil Fuel Free Index Series was developed for investors who want to address exactly this new risk.”