Sustainability, Sustainability & Risk, GCAS

Strategy in creating a 'Carbon Winner's Index'

For an independent financial firm, we developed a “Carbon Winners” index

Challenge

ECPI, an independent financial firm, understands that emissions management will increasingly represent a source of competitive advantage for companies with significant carbon exposure. The client needed to select the best positioned Companies vis à vis their past and expected CO2 emissions vs sector averages and competitors. This index had to be integrated with their traditional ECPI Alpha Screening Methodology and liquidity constraints.

Approach

Identify key industrial sectors on the basis of the current and expected future CO2 emission at company level and industry averages.

Develop index components on the basis of:

1. Carbon Data: Carbon emission over Turnover, Reduction Potential Policy Assessment, Average Carbon Emission of direct competitors. This assessment has been performed by Arthur D.Little on the basis of their business experience, methodology and corporate database.

2. ECPI Alpha Rating: the ESG (“Environmental, Social, Governance”) evaluation, as reflected by ECPI Alpha Screening Methodology.

3. Stock liquidity to build a liquid and investable equity index.

Value

The ECPI Carbon Winners Equity index, designed by Arthur D. Little is published daily on ECPI Bloomberg Site ECPS<GO> and with the usual financial media.

This is an important component part of the ECPI indices with ratings on traditional and innovative asset classes such as Equity and Credit Portfolios, CDOs, Hedge Funds, and a full range of Beta and Alpha Market Indices. Worldwide clients are major international Investment Banks, Retail and Private Banks, Asset Managers, Insurance companies, Foundations, Pension Funds and other institutional investors.

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