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June 29, 2010
FTSE Launches FTSE CDP Carbon Strategy Index Series
    by Robert Kropp

Developed by FTSE’s Responsible Investment Unit and the Carbon Disclosure Project (CDP), the indexes will support investors who incorporate climate change into investment strategies.


Last week, FTSE Group, the UK-based index company, launched the FTSE CDP Carbon Strategy Index Series. The series consists of two indexes. The FTSE CDP Carbon Strategy All-Share Index weights the constituents of the FTSE All-Share Index according to their exposure to carbon risk, relative to industry sector peers, while the FTSE CDP Carbon Strategy 350 Index does the same for constituents of the FTSE 350 Index.

The index series uses data supplied by the
Carbon Disclosure Project (CDP), whose 534 institutional investors represent more than $64 trillion in assets under management. The index series also uses the benchmarking services of ENDS Carbon, a carbon performance and risk analysis firm.

According to a
report prepared by ENDS Carbon, two hypotheses drove the founding of the FTSE CDP Carbon Strategy Index Series. "Climate change and climate change regulation will have a material impact on the earnings of companies in certain key industry sectors," the report states. Furthermore, carbon efficiency "can reduce operating costs, help drive lean business, encourage product innovation and strengthen supplier relationships."

The corporate activities measured for the index series include policy commitments and emissions reduction targets, measurement and benchmarking, senior executive accountability, achievement of outcomes, and disclosure.

Of the companies listed on the FTSE All-Share Index, Unilever received the highest score, followed by BT Group and Morrison. According to the report, "Unilever has developed an excellent track record of reducing emissions," which have declined by 10% over the past three years.

David Harris, the Director of Responsible Investment at FTSE Group, said of the launch, "This is a timely and innovative index series which comes amidst a broad range of regulatory and market incentives being introduced around the world to facilitate the transition to a low carbon economy."

 

 
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