S&P Dow Jones Indices (S&J DJI), a provider of market indices, has launched three new climate change index series to highlight the role of public companies in climate change and to help investors lower their exposure to fossil fuels.
The first, the S&P Global 1200 Carbon Efficient Index Series, is designed to measure the stock performance of the constituents of the S&P Global 1200, an equity index covering 31 countries and about 70 per cent of the global stock market capitalization.
The indices group companies according to their sectors such as energy, consumer goods and services, healthcare, financials and telecommunications, and give higher weightage to companies that have lower levels of carbon emissions and lower weightage to those with higher levels.
The second, the S&P Global 1200 Carbon Efficient Select Index Series, is also designed to measure the performance of companies in the S&P Global 1200 that have a smaller carbon footprint. The indices in this series leave out companies that have a larger carbon footprint, relative to their peers.
The carbon footprint for both the Carbon Efficient and Select Index Series is defined as a company’s annual greenhouse gas (GHG) emissions and is calculated by Trucost, a UK-based consultancy which helps organisations measure and manage the environmental risks associated with their operations.
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 or use fossil fuels, either through a third party or for in-house power generation.
Julia Kochetygova, head of sustainability indices at S&P Dow Jones Indices, said that many investors are trying to facilitate the global transition to a low-carbon economy by financing projects in the renewable energy sector, and by avoiding companies that produce high emissions or minimizing their exposure to fossil-fuel companies.
The three new S&P DJI index series should provide alternative performance benchmarks and highlight companies that meet the strict fossil fuel and carbon efficient standards set within each index series, she said.