German index provider Solactive has partnered with US data firm ISS ESG and released two series of ‘climate-conscious’ benchmarks that meet the requirements of planned EU climate benchmarks.
The Solactive ISS ESG Provisional Paris-Aligned Benchmark Indices (PAB) provide exposure to a portfolio aligned with a 2°C scenario, through the year 2050, and are consistent with the Paris Agreement objectives.
The indices aim to reduce carbon intensity by 50% versus their respective benchmark and feature a broader set of exclusions.
The Solactive ISS ESG Provisional Climate Transition Benchmark Indices (CTB) allow investment in baseline climate-aware allocations towards a low-carbon economy.
These indices seek to reduce carbon intensity by 30% versus their respective benchmark and feature basic exclusions, including controversial weapons and international norms violators.
The PAB and the CTB’s parent index is the Solactive Global Benchmark Series (GBS).
The index methodology is designed to meet the criteria of the final report from the EU Technical Expert Group on Sustainable Finance (TEG) on climate benchmarks.
The indices are provisional and can be adapted further, as the related regulation still needs to be finalised according to planned EU delegated acts.
Like the S&P indices, the Solactive series exceeds TEG requirements by incorporating Scope 3 emissions.
But it doesn’t go as far, as the S&P also includes recommendations from the Task Force on Climate-related Disclosures (TCFD).
The Solactive indices will initially cover Europe and developed global markets, but can be adjusted to other markets and regions on demand.
The broader exclusion set of the PAB indices includes:
- ISS ESG norms-based research and controversial weapons exclusions; and
- Coal, fossil-fuel, and high-carbon intensity electricity producer exclusions based on ISS ESG energy and extractive industries’ screening.
The PAB and CTB indices also feature minimum exposure to sectors highly exposed to climate change, according to TEG requirements.
ISS ESG, the responsible investment arm of Institutional Shareholder Services, provides all environmental, social and governance, climate data and analytics for the indices.
Marija Kramer, managing director of ISS ESG, commented: “As our climate impact analyses demonstrate, the investment community now has a proven vehicle for direct investment in opportunities related to energy transition and a hedge against climate transition risks.”