Index provider Solactive has launched the Climate and Energy Transition Index, an index tracking the performance of companies that show the best commitment to energy transition in their sectors while exhibiting low volatility and high dividend yield characteristics.
The index is based on a methodology developed by Natixis in collaboration with Sustainalytics, a global provider of Environmental, Social, and Governance (ESG) research and ratings. The index is to be used as the basis for structured products issued by Natixis.
Using the Solactive GBS Developed Markets Large & Mid Cap Index as the starting universe, the index first screens out companies involved in the tobacco, weapons, fossil fuels and mining industries.
The remaining companies are assigned a Climate Score to reflect their level of involvement in the energy transition and climate issues. Calculated by Sustainalytics, the Climate Score incorporates a product lifecycle approach by evaluating companies both on their carbon footprint resulting from their operations and on the indirect emissions linked to products and services during their lifecycle.
It combines quantitative indicators to measure carbon emissions and qualitative indicators to evaluate the extent to which the company contributes to the climate and energy transition through innovative products and services. The best-ranked companies are further screened based on low volatility and high dividend yield.
Timo Pfeiffer (pictured), Head of Research at Solactive, says: “Investors can use the Solactive Climate and Energy Transition Index to gain exposure to companies that are pushing forward the transition to greener economies. Given increased social and environmental awareness, investing in such companies can reduce the risks caused by incompliance and potentially provide a ground for future outperformance.”
Aurélien Rabaey, Head of Equity Derivatives Sales EMEA and Global Head of Equity Derivatives Financial Engineering at Natixis, says: “Natixis is strongly committed to developing innovative investment solutions for retail & institutional investors. This new index provides exposure to the companies that are doing the most to reduce their climate impact and their climate risks exposure. Moreover, its features allow the generation of efficient pricing when applied to structured products.”
The index is composed of 40 companies listed in Developed Markets. The index is calculated as a price return index and is denominated in EUR. The weighting scheme combines low volatility and high dividend yield features.