S&P Dow Jones Indices extends climate transition and Paris-aligned indices

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Investors seeking deeper scrutiny of major companies’ climate and net zero plans have been given a boost this week, after S&P Dow Jones Indices announced the extension of two of its green corporate performance indices.

Unveiled yesterday, the S&P Net Zero 2050 Climate Select Index Series and the S&P Net Zero 2050 Paris-aligned Select Index Series are specifically designed as underlying indices for a structured financial product market that has increasingly incorporated environmental, social, and governance (ESG) principles into investment strategies, the company said.

The indices are aimed at measuring the performance of a targeted number of the largest, float-adjusted market capitalisation companies against a 1.5C global warming trajectory, the more ambitious target set out in the Paris Agreement.

Companies that are involved in weapons and tobacco-related business activities, connected to controversies surrounding ESG issues, or are non-compliant with the UN’s Global Compact principles are excluded from the new indices, the ratings provider said.

The indices are also aligned with EU regulations setting minimum standards for low carbon benchmarks. And, in the coming months, the firm also plans to launch additional net zero focused indices based on its other widely-tracked regional benchmarks, it said.

“We are very excited to extend our S&P Net Zero 2050 ESG index offering to include indices which bring greater transparency in measuring climate-related risks and that have been designed to cater to the structured product market,” said Jaspreet Duhra, global head of ESG indices at S&P Dow Jones Indices. “S&P DJI is committed to helping our customers and market participants address climate change and achieve their goals in the path to net zero by 2050.”

The move comes amidst growing calls for governments and standards bodies to ensure the wave of corporate net zero targets announced over the past two years are credible and translate into accelerated decarbonisation efforts.

The respected Science Based Targets initiative recently launched a new standard for assessing firms’ net zero targets, while UK Chancellor Rishi Sunak used this month’s COP26 Climate Summit to announce that listed firms in the UK would now be required to publish net zero strategies.

Similarly, UN Secretary General Antonio Guterres told the Glasgow Summit that the UN would appoint a new working group to explore how to ensure corporate net zero pledges are credible and deliver on their promised targets.