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June 24, 2009
New Investment Indices Will Track Companies Adapting to Low-Carbon Economy
    by Robert Kropp

Family of indices developed by the Carbon Disclosure Project and Markit join a growing number of investment vehicles that include environmental considerations.


With the introduction of a family of investment indices that reflect the financial performance of companies whose strong carbon management strategies position them advantageously for the transition to a low-carbon economy, investors have gained another tool for managing their sustainable portfolios.

The family of indices will be launched by Markit, a financial information services company, and the Carbon Disclosure Project (CDP). Based on data gathered by the CDP for its annual Carbon Disclosure Leadership Index (CDLI), the indices are designed to help investors gain exposure to companies whose greenhouse gas (GHG) emissions and climate change strategies help them actively manage the impact of their business operations on the environment.

On behalf of 475 institutional investors, the CDP issues annual information requests to more than 3,700 corporations worldwide. For its CDLI, the CDP scores companies in both carbon-intensive and non-carbon intensive industry sectors, according to the quality of their responses to the CDP's annual questionnaire.

Companies in the carbon-intensive sectors that received high scores on the 2008 CDLI include BASF, Iberdrola, and Nissan Motor. Companies with high scores in the non-carbon-intensive industry sectors include Merrill Lynch, Tesco, and EMC.

Markit and the CDP plan to launch indices for the US, the UK, and Europe, in addition to a global index. Markit will license the indices to exchange-traded fund (ETF) and structured product providers.

The number of investment indices that track the environmental performance of companies has grown in recent years. The FTSE4Good Index Series includes an index that identifies European companies with leading environmental practices, while the Dow Jones Sustainability Indexes incorporate environmental considerations in their criteria.

In addition, the S&P US Carbon Efficient Index was launched in March of this year. The index uses annual GHG emissions assessments compiled by Trucost to identify a subset of constituents in the S&P 500 with relatively low carbon footprints.

 

 
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