New York-based index provider MSCI Inc. has launched a new series of “low carbon” indices, comprised of companies with significantly lower carbon exposure than the broad market.
Launched Tuesday, the new MSCI Global Low Carbon Leaders Indices are based on the MSCI ACWI Index, the global benchmark covering developed and emerging markets, and utilize carbon data from MSCI ESG Research Inc.
The firm says that these indices are the first to address two dimensions of carbon exposure, both carbon emissions and fossil fuel reserves, in an effort to provide a tool for limiting investor exposure to carbon risk. The indices also aim to maintain wide market exposure by minimizing the tracking error compared to the performance of the parent standard indices.
“Today’s launch of the MSCI Global Low Carbon Leaders Indices provides asset managers, asset owners and ETF providers with a broad and representative benchmark that will help address clear demand from institutional investors who are increasingly aware of the investment risks associated with the transition to a low carbon economy,” said Baer Pettit, managing director and global head of the MSCI Index Business.
The new indices were developed at the request of Fourth Swedish National Pension Fund AP4, the French pension fund, Fonds de Réserve pour les Retraites (FRR), and Amundi (the asset management subsidiary jointly created by Société Générale and Crédit Agricole), which were looking for representative benchmarks to help track the transition to a low carbon economy.
“AP4 plans to invest with its partners up to €1 billion in these new low carbon investments,” said Mats Andersson, CEO of AP4. “Combined with a carbon footprint disclosure, we are confident that this approach can offer an alternative source of return while working for the public good.”
“Amundi’s mission is to constantly deliver concrete and innovative answers to meet the sustainable investing needs of our clients,” said Pascal Blanqué, chief investment officer of Amundi, which has US$1.1 trillion in assets under management. It has also licensed the new low-carbon indices with the intention to create index-tracking solutions.
Yves Chevalier and Olivier Rousseau, members of the FRR executive management board, said, “These low carbon indices are a promising avenue that can bring about increased awareness among listed companies that carbon is a major issue for a large investor community, for environmental as well as financial risk reasons. We see them as a new, pragmatic and powerful addition to FRR’s climate toolbox. And hence FRR intends to allocate a substantial initial amount up to €1 billion to seed this investment strategy and so encourage the development of sustainable finance underpinned by strong economics.”