Index provider S&P Dow Jones Indices (S&P DJI) and S&P Global’s Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More and sustainability-focused group Sustainable1 announced today the launch of the S&P Net Zero 2050 Carbon Budget Indices, a new series of market benchmarks measuring the performance of securities from key S&P indices selected to target a defined carbon emissions reduction ‘budget’ to achieve net zero emissions by 2050.
At launch, the series includes benchmarks based on parent indices S&P 500, S&P Global BMI, S&P Europe BMI, S&P Developed BMI and S&P Emerging BMI.
The design of the new index series is based on the most recent UN-backed Intergovernmental Panel on Climate Change (IPCC) report, published last year, assessing the current state of the global climate system and impacts of climate change. The report warned that while some of the major effects of climate change, such as rising sea levels, may be irreversible for thousands of years, rapid and meaningful action could still limit warming to 1.5°C, a level seen as necessary to avoid some of the direst impacts.
Richard Mattison, President of S&P Global Sustainable1, said:
“The 2021 IPCC report signaled a ‘code red’ for humanity and the investment community is responding to this alarm call, with over half the world’s assets under management now committed to net zero by 2050. It is essential that investors have access to simple, transparent and scalable tools to support their decision making, and we are proud to be launching this new series of indices to support investors in navigating the transition to a sustainable future.”
The indices in the S&P Net Zero 2050 Carbon Budget select and weight equity securities from their parent indices, to hit a defined target carbon budget compatible with the IPCC’s estimate for worldwide emissions needed to limit warming to 1.5°C.
Each index’s carbon budget is based on its launch year to 2050 – for example, the indices launched in 2022 will target an initial 25% emissions reduction, and around 10% annual reductions thereafter. For future launches, the annual required reduction will grow, based on a need to hit the 2050 target on a carbon budget with a tighter timescale.
Reid Steadman, Global Head of Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More & Innovation at S&P Dow Jones Indices, said:
“This new series of indices reflects the need to provide indexing solutions that support investors and companies in meeting their net zero goals as we continue to contribute to and build upon the progress the financial services industry has achieved to date.”
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