Green Indices Sprout Again

    Stockholm (NordSIP) – Sustainable indices has become a stepping stone for many portfolio managers aiming to integrate sustainable investment practices. Last week, NordSIP has taken a step back and offered an overview of low-carbon indices for beginners. On November 29, global index, analytics and data provider FTSE Russell announced the launch of the FTSE Global Climate Index Series and the FTSE ESG Index Series.

    For the Global Index series, FTSE relies on a method that maintains a risk and return profile similar to broad market benchmarks. At the same time, the weights of the constituents are determined using three climate change measures: carbon emissions, fossil fuel reserves, and green revenues data. This series is based on the FTSE Russell’s Green Revenues data model which is a unique dataset of company exposure to green product and service-related revenues.

    Meanwhile, the ESG Index series uses the FTSE Russell’s ESG Ratings and data models to tilt company weights. The methodology then re-weights the constituents to ensure that the index is industry-neutral compared to similar market indices. The firm’s proprietary ESG ratings rely on a combination of 14 themes, grouped under the three E, S and G pillars. Biodiversity and Climate Change are examples of the Environmental category, while Health and Safety and Tax Transparency are themes of the Social and Governance dimensions, respectively.

    Both new index series also exclude controversial weapon manufacturers, the list of which is reviewed on a semi-annual basis.

    “Coming out of COP23 there is agreement that development and adoption of green technology and services are contributing to an acceleration in the transition to a green economy,” Tony Campos, Director and ESG Product Management and FTSE Russell said. “We are seeing a clear move towards integrating environmental, social and governance considerations into core benchmarks and passive investments as part of this trend. Responding to demand from clients we are expanding our range of climate change and ESG benchmarking tools to help align sustainability considerations with specific investment objectives.”


    Picture © Nomad Soul – Shutterstock

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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