S&P Dow Jones Indices has launched the first carbon emitter scorecard amid rising interest in the ESG (Environmental, Social and Governance) sector as investors look at how they can impact climate change. On its debut, the S&P Index Carbon Emitter Scorecard, which is based on the S&P Global 1200, found that only 15% of global emissions are directly produced by the world’s blue-chip organisations.
Tim Edwards, Senior Director, Index Investment Strategy, S&P Dow Jones Indices.
The scorecard analyses carbon production and efficiency for major indices and styles across global markets. The S&P Global 1200 is used because it captures 70% of global equity market capitalisation and is made up from seven major indices: the S&P 500, S&P Europe 350, S&P TOPIX 150 (Japan), S&P/TSX 60 (Canada), S&P/ASX All Australian 50, S&P Asia 50 and S&P Latin America 40.
The research includes direct carbon scores for the S&P Global 1200 and its major regional components, which have been attained by summing up the emissions of the constituents. So-called “direct emissions” include emissions of CO2 produced directly by an entity, e.g. by burning fossil fuels.
Notably, the report found that if every constituent of the S&P 500 could reduce its direct emissions to 0 it would be the equivalent of eliminating all emissions produced in the UK, France and Germany combined.
However, while only 15% of global emissions are directly produced by the world’s blue-chip organisations, the reduction required for the global temperature to remain within 2°C from pre-industrial levels may be as much as 75%. This temperature gauge is relevant because the 2015 United Nations Climate Change Conference committed a majority of the world’s governments to limiting the increase in global temperatures to only 2˚C above pre-industrial levels.
Tim Edwards, Senior Director of Index Investment Strategy at S&P Dow Jones Indices, said in a statement: “Our S&P Index Carbon Emitter Scorecard helps to frame the importance of corporate and investor participation in the efforts to limit carbon emissions….By examining various measures of efficiency and discussing styles and sectors the report provides key considerations in building environmentally friendly portfolios including insight into the styles and sectors that are more likely to be powered by caffeine not fossil fuels.”
The SPDR S&P 500 Fossil Fuel Free ETF is available to investors who want to access to companies without exposure to fossil fuel reserves. It tracks the S&P 500 Fossil Fuel Free Index and has a fee of 0.25%. It is offered as part of SSGA’s ESG line-up and helps investors eliminate fossil fuel reserves from their portfolio while maintaining exposure to the core of the S&P 500 Index.
S&P Dow Jones Indices develops and maintains a broad range of investable sustainability indices which are designed to measure the performance of companies that have demonstrated superiority in the areas of environmental, social or corporate governance responsibility. The index family also includes clean or alternative energy indices, carbon efficient indices and green investing themes such as water.