MSCI has launched MSCI Global Low Carbon Target Indices, a set of new indices to complement the MSCI Global Low Carbon Leaders Indices which were launched earlier this month.
The MSCI Global Low Carbon Target Indexes were developed in response to investor demand for benchmarks designed to help identify potential risks associated with the transition to a low carbon economy while representing the performance of the broad equity market.
The indices weight shares based on their carbon exposure in the form of carbon emissions and fossil fuel reserves. The indices include all the companies in the parent index and are designed to achieve maximum carbon exposure reduction given a specific tracking error target.
The MSCI Global Low Carbon Target Indices are based on the MSCI ACWI Index which is a global policy benchmark covering developed and emerging markets widely featured in structured products.
SRP data shows that there are 342 products linked to the MSCI ACWI across eight different databases, the majority of which were launched in Austria, Germany and the USA.
Indices linked to companies with a low carbon footprint have not been used in structured products since 2011 when two products (Eureka Progetto Imprese Verdi 2017 linked to the Low Carbon 100 Europe Index and Trigger Performance Securities - S&P US Carbon Efficient linked to the S&P US Carbon Efficient Index were launched in Italy and the US respectively, although the latter product was withdrawn.
Solactive
Frankfurt-based Solactive is the latest index provider to enter the carbon space after joining efforts with Canada’s Corporate Knights Capital to launch a family of low carbon indices, providing exposure to best-in-class companies in carbon-intensive sectors, while maintaining benchmark exposure for companies in all other sectors.
The new indices, which have been designed to serve as benchmark or underlying for low carbon investment strategies, include the Solactive CK Low Carbon US Index, the Solactive CK Low Carbon Europe Index and the Solactive CK Low Carbon Canada Index.
The Solactive CK Low Carbon Index family is the first in the industry to use the Sustainable Industry Classification System (SICS), established by the Sustainability Accounting Standards Board (SASB) to categorise industries based on resource intensity, sustainability impact and sustainability innovation potential.
A defining feature of these low carbon indices is that they ensure a minimum 50% reduction in carbon intensity against the market benchmarks, as verified by South Pole Carbon.
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