STOXX Limited, has introduced the STOXX Low Carbon index family. The new index family consists of four sub-families which offer varying degrees of carbon exposure to enable market participants to limit the exposure of their portfolios to carbon risk while participating in the low-carbon economic growth….
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The STOXX Low Carbon index family is designed to act as an underlying for exchange-traded funds and other investable products, such as structured products and derivatives; and as benchmark for passive and active investment strategies.
“Reducing carbon emissions is a global objective, and market participants look for fully tailored solutions to decarbonize their portfolios to address long-term climate risks, while participating in the sustainable growth of a low-carbon economy. One of their main challenges in this process is high-quality data that makes granular analysis of companies’ carbon footprint and climate impact through the entire supply chain possible,” said Hartmut Graf, chief executive officer, STOXX Limited. “Our STOXX Low Carbon index family enables investors to easily incorporate sustainability factors into their portfolio which focus on carbon emissions. Especially the STOXX Global Climate Change Leaders Index provides an innovative solution to track companies that are leaders in mitigating climate change and are publicly committed to reducing carbon emissions. We are delighted to be one of the first index companies incorporating this data provided by the market leader CDP into a global family of indices.”
“Indices have a tremendous impact on investor behavior, as they give valuable orientation and benchmarks for investment decisions. For 15 years now CDP has provided investors with data and analysis that allow them to incorporate climate factors into their investment approach that can highlight mitigation leaders and laggards.” said Paul Simpson, chief executive officer of CDP. “We are delighted to be part of this initiative together with STOXX and South Pole Group to launch this low carbon index family. These innovative indices will flag the growing importance of climate issues in portfolios and encourage investment flows into low-emitting companies, such as those within CDPs Climate A List, thus fostering the transition to a low-carbon economy.”
The STOXX Low Carbon Indices are based on reported and estimated carbon emission data of companies, collated and provided by CDP Europe (formerly Carbon Disclosure Project) as part of CDP Worldwide, the leading international non-profit organization working with shareholders and companies to systematically change market behavior and South Pole Group, a leading emission reduction project developer. The STOXX Global Climate Change Leaders Index is based on CDP’s global Climate A List that includes those companies with the most advanced and most effective climate change mitigation strategies. The 822 investors who request disclosure through CDP represent more than a third of the world’s invested capital. The STOXX Global Climate Change Leaders Index is the first ever index available to market participants that tracks the global CDP Climate A List.
As part of the four sub-families, the STOXX Low Carbon Indices use both estimated and reported carbon intensity data and are closest to the underlying benchmark. They are aimed at investors who want to decarbonize their portfolio while participating in the market movements. For the STOXX Reported Low Carbon Indices, the carbon footprint is calculated by using reported data only. The STOXX Industry Leaders Indices are a group of blue-chip indices with a fixed component number, and include the companies with the lowest carbon emissions per industry according to estimated and reported data. The STOXX Low Carbon Footprint Indices have the lowest carbon footprint as they exclude high emission supersectors and the worst emitters. These indices are mainly aimed at structured product providers.
The universe for the STOXX Low Carbon index family is the STOXX Global 1800 Index. From this, components are selected on the basis of their carbon intensity data. The indices are price weighted with a weight factor based on the free-float market cap multiplied by the corresponding Z-score carbon intensity factor of each constituent, subject to a 5% cap. Companies with lower carbon intensities are overweighted, while companies with higher carbon intensities are underweighted. Additionally, the STOXX Industry Leaders Indices will be available in equal weight versions.
The STOXX Low Carbon Indices are calculated in price, net and gross return versions and are available in the following currencies: euro, US dollar, Australian dollar and Japanese yen. Historical data for this index family is available from Dec. 19, 2011. The indices are reviewed annually in December.