Leading asset owners including Swedish state fund Fjärde AP-fonden (AP4) and France’s Fonds de réserve pour les retraites (FRR) are backing a new suite of low carbon indices from MSCI with substantial seed financing.
MSCI says its new Global Low Carbon Leaders Indexes – which will comprise companies with “significantly lower” carbon exposure than the broad market – were developed at the request of AP4, the FRR and $1.1trn asset manager Amundi. Amundi has licensed the new offering to create a series of tracking products.
The investors, MSCI says, were looking for representative benchmarks in the transition to a low carbon economy. MSCI then consulted on the proposed methodology with a range of global investors.
The new indices are based on MSCI’s ACWI [All Country World Index] and use MSCI ESG CarbonMetrics data. The investors plan to use new indexes as benchmarks for passive mandates, MSCI said.
“AP4 plans to invest with its partners up to €1bn in these new low carbon investments,” said AP4 Chief Executive Mats Andersson. “Combined with a carbon footprint disclosure, we are confident that this approach can offer an alternative source of return while working for the public good.”
FRR executive management board members Yves Chevalier and Olivier Rousseau said the indices are “a new, pragmatic and powerful addition to FRR’s climate toolbox”.They added: “And hence FRR intends to allocate a substantial initial amount up to €1bn to seed this investment strategy and so encourage the development of sustainable finance underpinned by strong economics.” AP4 has assets of SEK276bn (€29.9bn), while the FRR is worth €36.6bn.
“A powerful addition to FRR’s climate toolbox”
Baer Pettit, Global Head of the MSCI Index Business, said the launch helps address “clear demand from institutional investors” who are increasingly aware of the investment risks of the transition to a low carbon economy. The launch also has the backing of the UN Environment Programme (UNEP). UNEP Executive Director Achim Steiner said: “From a UN perspective decarbonizing the portfolios of institutional and retail investors worldwide can be a powerful conduit to realizing low carbon economic growth.”
The latest launch is just the most recent to try to tackle environmental issues. Earlier this month, VIS Essential Investments, the specialist investment management partnership, launched an index to track the performance of financially successful and resource efficient companies using data supplied by environment analyst Trucost. The VIS Energy, Food and Water (EFW) Efficiency Index enables investors to identify companies best placed to generate long-term growth with lower impacts. MSCI announcement