ABN Amro has launched a new equity index, the Climate Change & Environment Index, which tracks the performance of listed companies that are involved in tackling the adverse effects of
ABN Amro has launched a new equity index, the Climate Change & Environment Index, which tracks the performance of listed companies that are involved in tackling the adverse effects of climate change and mitigating environmental degradation.
Dr Paul Thind of ABN Amro’s equities business, who led the development of the index, says: ‘This is the first benchmark reference instrument that can be used both to invest in the growth potential of the market addressing climate change and also effectively manage risk associated with these issues.’
The index has many potential applications, such as a platform for investments that are linked to the performance of the index, including tracking certificates or structured notes. Other potential developments include a collateralised debt obligation based on the credit ratings of the index constituents.
Building upon ABN Amro’s range of individual eco-sector indices, the climate change index is a market capitalisation-weighted index composed of up to 32 stocks independently selected by Standard & Poor’s.
It uses criteria that identify the leading companies from a range of environmentally crucial sectors, giving exposure to companies involved in the most important sub-sectors in the climate change and environment sector: reduction of carbon dioxide through renewable energy, clean soil and water through water and waste management, and cleaner and less toxic air and water through reduction in global warming emissions using catalytic converters.
Index constituents have been vetted by ABN Amro’s sustainable development group to ensure they conform to the bank’s socially responsible investment standards.
The index is part of ABN Amro’s eco-markets business platform, a cross-discipline group that identifies climate-change and environment-related market opportunities and creates innovative new financial instruments and products that address them to support clients’ current and future needs.
Says Charles Longden, head of eco-markets and global head of credit trading: ‘Climate change creates new challenges, opportunities and risks for our clients. Eco-markets brings together related product areas from across the bank and develops solutions to help them manage these risks and also take advantage of new opportunities.’
Eco-markets business areas include emissions trading, provision of certified emissions reductions for clients reducing their carbon footprint, corporate broking for companies in the renewables and carbon credit sectors, commodity derivatives for bio-fuels, energy and freight, eco-related structured products including ETFs and capital protected notes, lending to clients in the wind, solar, biomass and bio-fuel industries, socially responsible investment and renewable energy private equity funds, tax advice for eco- and climate change-related government incentives, equity research, equity syndication and fundraising.