S&P DJI Launches Climate-Focused Indices

S&P Dow Jones Indices and Sustainable1, an ESG intelligence provider, announced on earlier this month the launch of a group of climate-focused market benchmarks called the S&P Net Zero 2050 Carbon Budget Indices.

The structure of these indices is based on the findings of the 2021 Intergovernmental Panel on Climate Change report. The most recent report assessed the state of climate change and the pace of progress toward keeping global temperature increases under 1.5ºC compared with pre-industrial levels. The indices’ methodology enables them to allocate and adjust a carbon budget for their clients based on the year of the indices’ launch.

“The 2021 IPCC report signaled a ‘code red’ for humanity and the investment community is responding to this alarm call, with over half the world’s assets under management now committed to net zero by 2050,” said Richard Mattison, president of S&P Global Sustainable1, in a press release. “It is essential that investors have access to simple, transparent and scalable tools to support their decision making.”

The press release says that more than half of global assets under management are now committed to net zero by 2050 through the Net Zero Asset Managers initiative, which is part of the Glasgow Financial Alliance for Net Zero. Usually referred to as GFANZ, the Glasgow group was launched in 2021 by U.N. Special Envoy on Climate Action and Finance Mark Carney and the COP26 Presidency, in partnership with the Race to Zero

campaign. Its goal is to unite net-zero financial sector-specific alliances from across the globe into a single industry-wide strategic alliance.

The S&P Net Zero 2050 Carbon Budget Indices are rebalanced yearly. At each rebalance, updated carbon emission levels of the companies in the indices will be used to achieve the decarbonizations required while minimizing sector deviations.

The equity securities in the S&P Net Zero 2050 Carbon Budget Indices are selected from an underlying universe of broad-market parent indices including the S&P 500, S&P Global BMI, S&P Europe BMI, S&P Developed BMI, and S&P Emerging BMI.

The S&P Net Zero 2050 Carbon Budget Indices launch includes: S&P Global Net Zero 2050 Carbon Budget (2022 Vintage) Index; S&P 500 Net Zero 2050 Carbon Budget (2022 Vintage) Index; S&P Europe Net Zero 2050 Carbon Budget (2022 Vintage) Index ; S&P Emerging Net Zero 2050 Carbon Budget (2022 Vintage) Index; S&P Developed Net Zero 2050 Carbon Budget (2022 Vintage) Index.

S&P DJI is adding to its other climate-focused index initiatives. In May 2021, the index provider announced that it had been chosen by the German government to develop the S&P ESG Eurozone 60 Bund-SV Index, which is intended to serve as a performance benchmark for four of the government’s pension funds. The S&P DJI said the new index intends to incorporate the minimum standards for EU Climate Transition Benchmarks and align with the Paris Agreement.