Calvert Investments launches ESG-themed equity index

Aug 12th, 2016 | By | Category: ETF and Index News

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Maryland-based asset manager Calvert Investments has launched an index tracking globally-listed firms with low carbon emissions, those that are actively reducing their greenhouse gas emissions, or those expanding their use of renewable energy sources. The Calvert Energy Research Index, the seventh addition to the firm’s suite of responsible indices and its second research index, has been designed to form the basis for future passive investment products such as exchange-traded funds.

Calvert Investments launches global energy research index

The Calvert Energy Research Index tracks global firms dedicated to reducing their carbon footprint.

In the wake of the Paris Agreement, which saw broad global alignment on capping worldwide carbon emissions, corporations are increasingly pressured to improve their environmental footprints and strive for sustainable business practices. Companies with business practices harming the environment are at greater risk of hurting firm value as a result of litigation or defamation. This has driven fund flows away from such firms, increasing pressure on them to adjust their operations.

“The global capital markets are poised to play a significant role in future efforts to address climate change and bolster lagging sustainability standards,” said John Streur, CEO of Calvert Investments. “Calvert is striving to accelerate this shift through innovative, lower-cost funds that balance investors’ financial and ESG objectives. The Calvert Global Energy Research Index is our latest step forward.”

Eligible constituents must also meet minimum ESG standards as set forth by Calvert’s Principles for Responsible Investment. This screening stage ensures firm principles are aligned with advancing environmental sustainability and resource efficiency, contributing to equitable societies and the upholding of human rights, and promoting accountable governance through increased transparency.

Similar to the Calvert Global Water Research Index, launched in February of this year, Calvert’s new Global Energy Research Index takes a comprehensive approach to investing in the renewables sector as well as innovators in established industries.

“We are seeing companies beyond the renewable energy sector taking exciting steps to improve their environmental and sustainability practices,” said portfolio manager, Jade Huang. “This is a key reason why our new index encompasses positive disrupters that are differentiating themselves and driving impact across the utilities, industrials and technology sectors.”

UK-based investors interested in current ETFs which screen global firms for low carbon emissions or engaging in renewable energy sources may consider the following options:

The iShares Global Clean Energy UCITS ETF (LSE: DNRG) tracks the S&P Global Clean Energy Index. The index is composed of 30 of the largest global companies involved in the clean energy sector. The fund has $109m in assets under management (AUM) and a total expense ratio (TER) of 0.65%.

The Amundi MSCI World Low Carbon UCITS ETF (LSE: LWCU) tracks the MSCI World Low Carbon Leaders Strategy Index. By excluding companies with the highest carbon emissions intensity and the largest owners of carbon reserves per dollar of market capitalization from the parent MSCI World Index, the low carbon index aims to achieve at least 50% reduction in its carbon footprint. The index has over 1000 constituents. The fund has AUM of $147m and a TER of 0.25%.

The PowerShares Global Clean Energy UCITS ETF (LSE: PSBW) tracks the WilderHill New Energy Global Innovation Index. The index is comprised of 98 companies, listed across 23 countries, whose innovative technologies and services focus on the generation and use of cleaner energy, conservation, efficiency and the advancement of renewable energy. The fund has AUM of $10m and a TER of 0.75%.

The UBS MSCI World Socially Responsible UCITS ETF (LSE: UC44) tracks the MSCI World Socially Responsible Index. The index has 390 constituents that represent the best-of-class companies from an ESG perspective. The fund has AUM of $171m and a TER of 0.38%.

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