The FTSE Group, the company behind various stock exchange indices, last week launched the FTSE CDP Carbon Strategy Index Series, jointly developed with the Carbon Disclosure Project (CDP)and carbon benchmarking company ENDS Carbon.
The first two indices are for the UK market: the FTSE CDP Carbon Strategy All-Share Index and the FTSE CDP Carbon Strategy 350 Index. Full details are here, but the indices are ‘carbon-tilted’ versions of the UK’s FTSE All-Share and FTSE 350 indices designed to reflect the risk associated with future carbon costs. In industries where carbon risk has a significant impact on corporate earnings such as aviation and oil and gas, companies will be subject to tilts that are far greater than those in lower risk sectors. It means that the indices will be ‘sector neutral’, rather than excluding companies.
Well it just adds to the pressure on companies to address their carbon footprint. To quote the press release ‘Both indices have been designed in response to growing awareness of the significant potential impact of climate change on investment returns’. It means that investors can maintain a wide investment portfolio whilst managing the climate risk.
Expected legislation may be the headline driving force behind much of the corporate attention on carbon emissions, but the impact of investor attitudes is easily as powerful, at least in larger companies. Tools, such as this, that allow investors to make informed decision based on the financial impact of future legislation and other climate change consequences can only add to the pressure and keep green IT at the forefront of corporate minds.