German index group Solactive has launched an index to track companies embracing the transition to renewable energy while exhibiting low volatility and high dividend yield characteristics.
The Solactive Climate and Energy Transition Index has been developed using a methodology from French bank Natixis, with research and ratings group Sustainalytics. Natixis will use the new index as a basis for some of its structured products range.
In a statement announcing the launch, Timo Pfeiffer, head of research at Solactive, said that investors would be able to the index to gain exposure to companies that are “pushing forward the transition to greener economies.”
He said: “Given increased social and environmental awareness, investing in such companies can reduce the risks caused by incompliance and potentially provide a ground for future outperformance.”
The Solactive GBS Developed Markets Large & Mid Cap Index was initially used as the starting index as it screens out companies involved in the tobacco, weapons, fossil fuels and mining industries. From here, companies were assigned a climate score which reflected their involvement in energy transition and climate issues.
The climate score is calculated by Sustainalytics and evaluates companies on their carbon footprint resulting from both their operations and emissions linked to their products and services.
The best-ranked companies are then screened further based on their volatility characteristics and level of dividend yield.
Aurélien Rabaey, head of Equity Derivatives Sales EMEA and global head of Equity Derivatives Financial Engineering at Natixis, said that the new index provides exposure to the companies that are doing the most to reduce their climate impact and their climate risks exposure.
He added: “Its features allow the generation of efficient pricing when applied to structured products.”