Measuring the investment risks of climate change



New Carbon Strategy Indices for Australia, Europe and Japan have been launched by global index provider the FTSE Group, in partnership with the Carbon Disclosure Project and ENDS Carbon.

The indices are designed to help investors reduce the long-term investment risks associated with climate change and related regulation in these markets.

David Harris, Director Responsible Investment, FTSE Group noted, 'Institutional investors have demonstrated an appetite for using alternative index weighting methodologies, including the incorporation of risk based approaches. At the same time they are under increasing pressure to demonstrate action on integrating climate change and carbon-related risks in their portfolios.'

The new indices in the series include the FTSE CDP Carbon Strategy Australia 200 Index,FTSE CDP Carbon Strategy Australia 300 Index, FTSE CDP Carbon Strategy Europe Index and FTSE CDP Carbon Strategy Japan Index.

These indices join two existing UK indices: theFTSE CDP Carbon Strategy All-Share Index and the FTSE CDP Carbon Strategy 350 Index.

Initially launched in December 2011, the index series benefits from the combined expertise of Carbon Disclosure Project (CDP), which acts on behalf of over 650 institutional investors globally and operates the largest database of corporate climate change information in the world; ENDS Carbon, the leading provider of carbon performance benchmarking and ratings; and FTSE, a pioneer in both the field of Responsible Investment and in the development of alternatively-weighted and risk based index methodologies.

It is widely accepted that climate change will increasingly impact the profitability of companies and portfolios over the coming decades. FTSE indices are used extensively by investors world-wide for investment analysis, performance measurement, asset allocation, portfolio hedging and for creating a wide range of index tracking funds.

The launch is seen as a timely response to the concerns of a large number of pension funds and asset managers who are seeking to incorporate carbon risks into their investment strategy.

Paul Simpson, Chief Executive Officer, CDP noted, 'One of the key elements to avoiding dangerous climate change is that we shift capital flow towards companies that are acting to reduce carbon.'

'These indices, which apply forward-looking analysis to the CDP data set, offer investors a straightforward mechanism to protect themselves from risk and factor climate change into their investment decisions,' he added.

About FTSE Group

The FTSE Group ('FTSE') is a world-leader in the creation and management of indices. It calculates and manages a comprehensive range of equity, fixed income, real estate, currency, commodity and non market-cap indices, on both a standard and custom basis. The company has collaborative arrangements with a number of stock exchanges, trade bodies and asset class specialists around the world. FTSE is an independent company owned by the London Stock Exchange Group.

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