A new global rating system for investment funds launched Thursday to provide investors with insight into the climate impact of equity fund portfolio holdings.
The new rating system, known as Climetrics, was developed by CDP (previously known as the Carbon Disclosure Project) and the sustainable investment arm of proxy advisory firm, Institutional Shareholder Services Inc. (ISS), which is known as ISS-Ethix Climate Solutions.
The system is intended to allow investors to more easily integrate climate impact considerations into their investment decisions, and to “potentially encourage growth in climate-responsible fund products.”
The underlying rating methodology was developed by CDP and ISS-Ethix Climate Solutions, in consultation with non-government organizations, investors, asset managers, and academics. It scores funds across three levels to produce a “green leaf” rating from one to five, that assesses each fund’s portfolio companies, and the efforts of the fund manager at integrating climate change into their governance and investment processes.
“For the first time, investors in funds will be aware of their funds’ climate impact and can judge investments accordingly. Climetrics is a missing link between individual investment choices and the global problem of climate change, and will move the needle in incentivising both investors and companies to contribute to the low-carbon transition,” says Paul Dickinson, CDP’s executive chairman, in a statement.
Maximilian Horster, managing director at ISS-Ethix adds, “Climate change related investment risks and impact can thus far only be managed by professional investors. Climetrics will change this historical model by providing a sophisticated, transparent and independent climate rating of funds, based on the best available data, turned into a simple output that can be understood by every financial market participant.”
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