The new Index, which is part of the Standard & Poor’s global thematic index series, provides a benchmark to the market, as represented by the S&P 500, while allowing investors to create financial products that seek to gain exposure from a more environmentally efficient perspective.
“Standard & Poor’s is the first independent index provider to offer a broad U.S. market index with an environmental focus, reinforcing our position as the premier provider of global thematic focused indices.” With the addition of the S&P US Carbon Efficient Index to the global thematic family, the series will now cover such green themes as Water, Forestry, Eco and Carbon efficiency.
To reflect its carbon efficiency, the Index is comprised of constituents of the S&P 500 that have a relatively low Carbon Footprint, as calculated by Trucost Plc. Trucost, the environmental data organization quantifies the environmental impact of over 4,500 companies across different sectors and geographies. Trucost calculates the carbon intensity of companies in the S&P U.S. Carbon Efficient Index by researching and standardizing publicly disclosed information and engaging directly with companies to verify its calculations on an annual basis.
Carbon Footprint is calculated as the company’s annual greenhouse gas emissions assessment (expressed as tons of carbon dioxide equivalent) divided by annual revenue.
The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their Carbon Footprint. The 100 equities with the highest Carbon Footprints, whose aggregate exclusion does not reduce any individual GICS(i) sector weight of the S&P 500 by more than 50%, are removed. Historically, the choice to maintain at least 50% of each GICS sector weight provided the greatest reduction in carbon footprint while closely tracking the return of the S&P 500. Standard & Poor’s also excludes companies, if any, which have not yet been assigned a Carbon Footprint by Trucost.
Through 2008, the average annual Carbon Footprint of the S&P U.S. Carbon Efficient Index was 48% lower than that of the S&P 500.
Trucost Plc is a world-leading environmental data organisation which helps companies and investors understand the environmental impacts of business activities. Trucost provides data and analysis on company emissions and natural resource usage in financial as well as quantity terms to help investors, fund managers and analysts understand how environmental issues could affect companies’ future earnings. Institutional investors use the information to assess the carbon or environmental footprints of their portfolios, to identify differences in performance, address environmental risks and create structured products with lower carbon or environmental impacts. Trucost tracks data on the environmental impacts and disclosures of over 4,500 companies and has the world’s largest record of greenhouse gas emissions.
(i) The Global Industry Classification Standard is an enhanced industry
classification system. GICS was developed in response to the global
financial community’s need for one complete, consistent set of global
sector and industry definitions.
SOURCE Standard & Poor’s