Corporate Knights Capital has partnered with Solactive to launch a family of Low Carbon Indices, aiming to provide exposure to best-in-class companies in carbon intensive sectors, while maintaining benchmark exposure for companies in all other sectors.
The new indices available include: Solactive CK Low Carbon U.S. Index, Solactive CK Low Carbon Europe Index, and Solactive CK Low Carbon Canada Index. This new index family has been designed to serve as benchmark or underlying for low carbon investment strategies.
The Solactive CK Low Carbon Index family is the first in the industry to use the Sustainable Industry Classification System™ (SICS®), established by the Sustainability Accounting Standards Board® (SASB®) to categorize industries based on resource intensity, sustainability impact, and sustainability innovation potential.
A defining feature of these Low Carbon Indices is that they ensure a minimum 50% reduction in carbon intensity against the market benchmarks, as verified by South Pole Carbon.
The launch of these indices combines the expertise of Corporate Knights, an investment advisory and research firm specializing in sustainable investment solutions, and Solactive, one of the fastest growing index providers globally.
Toby Heaps, CEO of Corporate Knights Capital, said: “Our best-of-sector approach cuts carbon in half, while offering an efficiency upside in the sectors where it matters most.”
Steffen Scheuble, CEO of Solactive, added: “We are pleased to launch this innovative family of indices with Corporate Knights as demand from the market for sustainable investment solutions keeps increasing, while investors’ awareness and interest for that theme have considerably improved over the past few years.”
Maximilian Horster, Partner in the South Pole Group, said: “With our world-leading expertise on investment climate impact, we are proud to certify that investing into these low-carbon indices does indeed cut an investors direct investment carbon footprint by half.”
The starting index universe, composed of the largest companies in each region/country subject to liquidity and ownership screens, is provided by Solactive.
Corporate Knights then applies a carbon intensity screen to companies in high carbon sectors (Energy, Materials, Industrials and Utilities), removing companies which do not report or underperform relative to peers, until a 50% carbon intensity reduction relative to the starting index universe is achieved. This approach, by restricting the carbon screen to sectors accounting for the majority of carbon emissions, avoids introducing unintended bets in sectors for which direct and electricity-related carbon emissions are not significant.
Solactive calculates the three indices, which are market capitalization weighted. The Solactive CK Low Carbon Indices are net total return and rebalanced on a quarterly basis. The US, Canada and Europe Indices will respectively be calculated in USD, CAD and EUR. The three Indices were launched on September 25th, 2014 with an initial value of 100.
For more information on the Indices, please visit the Solactive website.