FTSE Russell has launched a new low-carbon index today. The global index provider is working with BNP Paribas, who has been licensed the FTSE Divest-Invest Developed 200 Index.
The FTSE Divest-Invest Developed 200 Index focuses on reducing exposure to companies associated with fossil-fuels and increasing exposure to companies who are committed to a low-carbon economy.
The index includes the largest 200 companies in the FTSE Developed All-Cap Index, however some sectors have been excluded.
Oil and gas producers, oil equipment services and distribution providers, and coal and general mining are not included in the index. Instead they are replaced by green companies like Waste Management, Tesla Motors and Vestas Wind Systems.
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Green companies are chosen based on the percentage of revenues they gain from green activities.
Kevin Bourne, Managing Director of Database Services at FTSE Russell, said: “We’ve seen a rapid expansion of the green businesses of many companies around the world. What’s been missing from measures of the ‘green transition’ is exposure to this growth side of the opportunity.”
BNP Paribas has licensed the new index to create swaps and structured products.
Neven Graillat, Global Head of Sustainable Investment Solutions, Global Markets at BNP Paribas, said: “We are delighted to collaborate with FTSE Russell to deploy this new climate index solution.
“For the first time, investors are being offered a way to assess companies based on their green revenues.
“Using data modelled by FTSE’s Low Carbon Economy (LCE), the index offers an innovative tool to help manage investors’ carbon risk while tilting towards companies engaged in the transition to a greener economy.”
Cian Fitzgerald, Head of UK Institutional Clients at BNP Paribas, added: “We see increasing appetite from our institutional investor client-base wishing to address climate change in their investment process.
“This index will enable us to bring to market products which satisfy the investment requirements of our UK institutional clients.”
The FTSE Divest-Invest Developed 200 Index is the first product to be developed following the creation of FTSE Russell’s innovative LCE database, which is set to be publicly launched in the coming months.