FTSE Russell has launched an innovative new index, listing companies engaged in the transition to a green economy with low carbon risk profiles.
The global index provider says that the FTSE Divest-Invest Developed 200 Index will help investors aiming to reduce their exposure to fossil fuels and increase exposure to companies demonstrating sustainable business practise.
"We’ve seen a rapid expansion of the green businesses of many companies around the world," said Kevin Bourne, MD of Database Services at FTSE Russell. "What’s been missing from measures of the ‘green transition’ is exposure to this growth side of the opportunity."
The FTSE Divest-Invest Developed 200 Index is constructed from the largest 200 companies in the FTSE Developed All-Cap Index, which is based on over 5000 small, medium and large-sized business stocks from developed markets around the world. Tesla Motors and Vestas Wind Systems are among its largest constituents, FTSE Russell said.
The new index will weight companies based on their Low Carbon Economy Industrial Indicator (LOWCII) factor, which uses data from FTSE’s green revenue data model, LCE, to assess "green" revenues. Companies with more green revenues will replace those that are excluded from the index, which include companies producing oil and gas and those operating in the oil equipment services and coal and general mining industries.
Neven Graillat, Global Head of Sustainable Investment Solutions, Global Markets, BNP Paribas, said: "The agreement adopted at last November’s COP21 conference in Paris was recognised as a political success and it has helped to put climate risk at the top of the agenda for investors.
"At BNP Paribas, we have raised more than €3 billion in sustainable equity solutions in the last three years including €750 million in the last quarter alone from investors looking to reduce the carbon risk in their portfolios. For the first time, investors are being offered a way to assess companies based on their green revenues."