Just months after launching its new S&P Green Bond Select Index, which measures the performance of green-labeled bonds that finance sustainability projects, S&P Dow Jones Indices and Trucost have announced the publication of the S&P Dow Jones Indices Carbon Scorecard, an in-depth report on carbon efficiency for the major S&P DJI benchmarks and styles across global markets.
The S&P Global 1200, which captures approximately 70 percent of global equity market capitalization and is formed of seven headline indices — S&P 500®, S&P Europe 350, S&P TOPIX 150 (Japan), S&P/TSX 60 (Canada), S&P/ASX All Australian 50 and S&P Latin America 40 — and the S&P/IFCI, a leading investible, emerging market index, provided the base for the research.
The report analyzes five measures of carbon: Carbon Footprint, Fossil Fuel Reserve Emissions (future emissions), Coal Revenue Exposure (revenue from coal extraction or coal power generation), Energy Transition (transition to clean energy to guage the International Energy Agency’s 2°C scenarios) and Green-Brown Revenue Share (clean energy activity versus carbon intensive activity).
“The S&P Dow Jones Indices Carbon Scorecard report demonstrates the range of metrics that market participants now use to understand carbon risk and opportunities. Many large institutional investors are incorporating these criteria in their investment processes and carbon is increasingly being considered as an investment factor,” said Dr. Richard Mattison, CEO of Trucost, part of S&P Dow Jones Indices.
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Report highlights include:
- The S&P Latin America 40 is potentially best positioned to meet a global 2°C energy mix scenario for 2030 and 2050, despite being one of the most carbon-intensive indices.
- The index with the lowest carbon footprint as of Dec. 31, 2016, was the S&P 500 Growth, followed by S&P 500. Emerging Markets was the most carbon intensive group with the S&P/IFCI ranking the highest carbon footprint.
- The Canada’s S&P/TSX 60 had 33 percent of its total market cap in high carbon footprint sectors ̶ energy, materials and utilities but was the third most carbon-efficient index. The absolute emissions of the constituents within the materials sector were driving this.
- The S&P/ASX All Australian 50 had the highest level of embedded emissions in proven and probable fossil fuel reserves and the greatest percentage of revenues derived from coal-based activities, making it the most exposed index to potential stranded assets.
- The S&P TOPIX 150 representing Japan was the least exposed to Fossil Fuel Reserve Emissions, with just 655 tons of apportioned emissions embedded in its constituents’ fossil fuel reserves.