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Index IDEA: FTSE Russell indexes meet Figueres’s climate challenge

At the PRI (Principles for Responsible Investment) in Person conference in September, the former head of the UN Framework Convention on Climate Change and architect of the Paris Climate Agreement, Christiana Figueres, called on PRI signatories to commit to investing 1% of their assets into green and clean technology by 2020. This Green Investment Challenge by Figueres highlights the increasing focus on companies that are contributing to the green economy through environmental products and services.

Using its Green Revenues data model that captures the exposure to the green economy of over 13,000 listed companies, index provider FTSE Russell believes that an additional 1% investment in green is very achievable for mainstream investors and, in fact, can actually improve performance relative to the broad benchmark, and has the index returns to back it up.

FTSE Russell examined five of its climate indexes which already meet or exceed the additional 1% green and clean technology threshold and found that all of them have outperformed their parent benchmark over the last five years:

Dan Carson, Head of Green Solutions, FTSE Russell, said:

"Christiana laid down an imposing challenge to global investors, but the good news is that it can be done. Not just that, by increasing exposure in the biggest global industrial transition of our generation, our green indexes at FTSE Russell help demonstrate the potential investment benefit as well. We have shown that it is possible for global investors to improve their long-term investment performance whilst playing their part in meeting ambitious climate targets."

FTSE Russell has been helping investors track the green transition since the launch of the FTSE Environmental Markets indexes back in 2008. More recently, two distinct routes have emerged to integrating green into a benchmark with different risk/return profiles. Those looking for deep thematic exposure to green, such as the New York State Common Retirement Fund, can create dedicated green portfolios that contain only those companies that generate the highest level of revenue from green businesses.  Others, such as HSBC Pension Fund, who are looking for a lower tracking error compared to the underlying benchmark, can take a tilted approach towards companies that have green revenues.

Learn more FTSE Smart Sustainability Index Series,  FTSE Green Revenues Index Series and the FTSE Environmental Markets Index Series.

 

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FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. FTSE®, Russell®, FTSE Russell®, MTS®, FTSE TMX®, FTSE4Good® and ICB® and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Dan Carson of FTSE Russell are as of November 15th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

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