ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc., today announced the launch of a family of EU climate benchmark indices in partnership with Solactive.
The new family of indices are consistent with the requirements specified by the European Union’s Technical Expert Group (TEG) on Sustainable Finance (2019) Report on Benchmarks and exceed TEG requirements by incorporating Scope 3 emissions from inception, ahead of the permitted four-year phase-in. The indices will include constituents based on the Solactive Global Benchmark Series (GBS) indices and will initially cover Europe and developed global markets with other markets and regions available based on client demand. All ESG and climate data and analytics supporting the new indices will be provided by ISS ESG.
The Solactive ISS ESG Paris-Aligned Benchmark (PAB) indices are designed to meet highly ambitious climate-related investment strategy requirements, while Solactive ISS ESG Climate Transition Benchmark (CTB) indices are intended to assist in implementing a climate-aware core equity allocation. The index names will contain the “Provisional” label pending the publication of EU delegated acts consistent with the TEG report.
“Through this family of indices, we are pleased to deliver to market our industry leading climate data and analytics for the benefit of institutional investors seeking to deploy climate-conscious portfolios,” said Marija Kramer, Head of ISS ESG. “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.”
The EU Climate Benchmark indexfamily supports the TEG requirements including through the following core inclusions:
- PAB’s constituents‘ scope 1+2+3 carbon intensity reduction is in excess of 50 percent versus the constituents of the GBS, and in excess of 30 percent for those of both the CTBs;
- ISS ESG Norms-Based Research and controversial weapons exclusions are applied;
- Coal, fossil-fuel, and high-carbon intensity electricity producer exclusions applied to constituents of the PABs based on ISS ESG energy and extractives screening; and
- Minimum exposure to sectors highly exposed to climate change is at least equal to the GBS parent universe.
ISS ESG Climate Impact Assessment Analytics for the Developed Markets PAB finds the following:
- An ISS ESG Climate Impact Assessment analysis shows the PAB portfolio is aligned with a 2-degree scenario through the year 2050, consistent with the objectives of the Paris Agreement;
- A 66 percent reduction in Scope 1+2+3 carbon emissions amonst the constituents of the PAB versus those in the GBS;
- Ninety-nine percent reduction compared with GBS in total potential future emissions from fossil reserve owning companies; and
- Sixty-five percent green power generation capacity for PAB constituents compared with 15 percent for those in the GBS.