S&P launches new index that weighs companies' carbon emission levels

By Devika Patel

Knoxville, Tenn., Dec. 10 - Standard & Poor's said it has created the S&P/IFCI Carbon Efficient Index, which measures the performance of investable emerging market companies whose weighting in the index is based in part on their level of carbon emissions.

The index is also designed to closely track the parent S&P/IFCI LargeMidCap Index, S&P's emerging markets benchmark.

The new index provides investors with 24% less exposure to carbon emissions when compared with the parent index, the S&P/IFCI LargeMidCap Index. At launch, the index covers 21 emerging markets, including Brazil, Russia, India and China, and more than 800 companies.

S&P and International Finance Corp., a member of the World Bank Group, launched the new index at the U.N. Climate Change conference in Copenhagen on Dec. 10.

The S&P/IFCI Carbon Efficient Index retains all the same constituents as the parent index, but with index weights adjusted by comparing companies within the same global sectors, using the carbon footprint as calculated by Trucost plc, the environmental data organization. This is defined as the company's annual greenhouse gas emissions assessment, expressed as tons of carbon dioxide equivalent, divided by annual revenues.

The index is part of S&P's expanding family of carbon efficient and other green indexes and follows the launch of the S&P U.S. Carbon Efficient Index and thematic indices covering the global clean energy, water, alternative and nuclear energy sectors.

"Emerging markets are critical to tackling climate change and currently represent more than 11% of the global equity market, as well as a rapidly growing share of carbon emissions," David Blitzer, the head of Standard & Poor's Index Committee, said in a press release.

"Institutional investors and plan sponsors increasingly want to factor carbon efficiency into their investment decisions, and S&P's carbon efficient indices - a U.S. index was launched earlier this year - provide powerful tools to enable them to reduce their carbon exposure without abandoning their investment strategy or experiencing below-market returns."

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