Following the successful launch of its low carbon equity index family, Solactive AG in collaboration with South Pole Group sets the bar for fixed income low-carbon index solutions with its new Solactive SPG Euro IG Low Carbon Bond Index.
The index will cover investment grade corporate bonds denominated in EUR while selecting companies that are less dependent on fossil fuels relative to higher carbon-emitting peers.
In line with the ambition shown at the recent Paris Climate Conference, many of the world leading economies have already imposed taxes or partial taxes on carbon (e.g. US, China, UK, Sweden) or implemented regulatory standards to lower emissions (e.g. Emission Trading Scheme in the EU). France is the first country to have introduced a carbon reporting obligation on financial institutions. Growing global concern about climate change has also encouraged the adaptation of climate themed investment strategies and prompted the inception of investor coalitions committed to reduce their portfolio exposure to greenhouse gas emissions. However, the mainstreaming of low carbon in finance has been limited to the equity side so far.
With a large proportion of global assets dedicated to fixed income debt, tapping into debt markets is essential to accelerate the transition towards a low-carbon economy and ultimately attain the “two-degree target”. Institutional investors have lacked investment-grade opportunities to invest in bonds where revenues are specifically allocated to climate change solutions in the past.
The Solactive SPG Euro IG Low Carbon Bond Index will attend to the needs of all risk-sensitive fixed income investors that seek to reduce the carbon footprint of their investment portfolio and mitigate climate change related investment risk. For the creation of the index, Solactive has extended its successful partnership with South Pole Group, the world’s leading provider of sustainability and climate finance solutions, and build on its past expertise in the development of climate-themed bond indices (Solactive green bond indices).
Dr. Maximilian Horster, Partner, Financial Industry, South Pole Group explains: “Until recently, transferring the logic of low carbon investments from equity to fixed income has been a challenge. We are excited that our innovative methodologies and unmatched climate change data capabilities now enable easy and effective climate friendly fixed income investments.”
Steffen Scheuble, CEO, Solactive AG says: “Solactive will make a vital contribution to the integration of climate change and mitigation efforts in fixed income investments as it will be providing the first diversified investment grade universe of bonds dedicated to finance low carbon companies.“
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