Index engineering company Solactive announced today the launch of two new Paris-aligned high-yield indices, the Solactive USD Corporate HY PAB Index and the Solactive Euro Corporate HY PAB Index, as well as the Solactive Euro Corporate HY Climate Transition Benchmark (CTB) Index.
According to Solactive, comes as investors increasingly consider aligning their investment decisions with ESG values, and demand grows for climate-investment strategies. The new indices follow the launch of the Investment Grade Paris Aligned Benchmark (PAB) index series.
Solactive stated that it used an index methodology for their benchmarks with stricter criteria than the PAB regulation. PAB requires gross emissions reductions of 50% at inception and by at least 7% year-over year. Solactive’s indices measures Scopes 1, 2 and 3 emissions, rather than using a phased-in scope 3 approach, and also measures carbon intensity based on the book values for debt and equity of companies, ensuring that the impact of companies is measured on an equal basis.
Solactive also applies ESG screens to exclude companies such as those that generate more than 10% of their revenue from the production exploration, distribution and services related to fossil fuels.
Despite the strict criteria, Solactive stated that it keeps the PAB screened indices aligned to their benchmark in terms of risk/return characteristics, as there are always constraints in how much the Paris-aligned index may differ from the parent index.
Timo Pfeiffer, Chief Markets Officer at Solactive, said
“Climate change is one of the biggest challenges of our time, which translates into a surge in demand for climate investment strategies. As part of the overall path to a greener planet, Solactive is committed to increasingly develop more sustainable investment solutions. We have been successfully doing that in the active investments space, where we are most prominent and present. Now we are moving towards the next stage of evolution in the fixed-income space with the recently launched Paris-aligned high-yield indices, which solidifies our lead role in climate investment strategies.”
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