As the Paris 2015 Climate Conference approaches, the interest in investment strategies based around carbon-aware exchange-traded funds and indices has been on the rise. The latest Canadian index series from S&P Dow Jones Indices (S&P DJI), a leading financial market index provider, further evidences this shift in investor demand.
The three S&P DJI indices offer a range of carbon-efficient investment solutions.
The three new Climate Change indices from S&P DJI have been launched in partnership with the Toronto Stock Exchange, and are derived from the constituents of the S&P/TSX 60 Index, Canada’s leading equity benchmark.
“S&P Dow Jones Indices is excited to bring its expanding series of carbon efficient and fossil fuel free indices to the Canadian market and its leading benchmark, the S&P/TSX 60,” says Julia Kochetygova, Head of Sustainability Indices at S&P Dow Jones Indices. “With an increasing number of Canadian investors basing their investment decisions on how companies manage environmental issues, this S&P/TSX index series will provide an important and relevant benchmark within this space.”
Eric Sinclair, President, TMX Datalinx and Group Head of Information Services, TMX Group, added: “The new indices recognize Toronto Stock Exchange issuers included in the S&P/TSX 60 for their efforts and performance in managing their environmental impact. As awareness of the effect of carbon emissions continues to grow, we believe investors will value these index offerings.”
To cater to the differing investor requirements, the three indices approach carbon-efficient investing with differing methodologies. The S&P/TSX 60 Carbon Efficient Index is designed to measure the performance of companies in the parent S&P/TSX 60 Index while overweighting/underweighting those companies that have lower/higher levels of carbon emissions.
The S&P/TSX 60 Carbon Efficient Select Index takes this methodology a step further by excluding those companies in the S&P/TSX 60 with the largest relative carbon footprint. The index is optimized so that it closely tracks the returns of the S&P/TSX 60.
The carbon footprint for both indices is defined as the company’s annual greenhouse gas emissions and is calculated by Trucost, a London-based firm that provides products and services that evaluate the environmental performance of companies.
The S&P/TSX 60 Fossil Fuel Free Index is designed to measure the performance of companies in the S&P/TSX 60 that do not own fossil fuel reserves. RobecoSAM, an investment specialist focused exclusively on sustainability investing, conducted the research for ownership of fossil fuel reserves.