With the increasing concern among investors over the potential risks of climate change and emissions-related regulations on investments, several stock exchanges have launched indices that track various environmental parameters of companies.
The Toronto Stock Exchange (TSX) is the latest to launch specific indices to track environmental parameters related to listed companies, with an aim to providing guidance to investors about risks related to climate change. TSX, in partnership with S&P Dow Jones Indices, recently launched the S&P/TSX 60 Carbon Efficient Index, the S&P/TSX 60 Carbon Efficient Select Index, and the S&P/TSX 60 Fossil Fuel Free Index. All three indices are derived from the constituents of the S&P/TSX 60.
The S&P/TSX 60 Carbon Efficient Index will include TSX 60 companies which will be evaluated on their greenhouse gas emissions. Companies, with lower emissions being given higher weight, while companies with comparatively higher emissions will have lower weightage.
The S&P/TSX 60 Carbon Efficient Select Index will be similar to the S&P/TSX 60 Carbon Efficient Index, except that the former will not include companies with larger relative carbon footprint.
Trucost Plc will be responsible for tracking the greenhouse gas emissions of the companies included in these two indices.
The S&P/TSX 60 Fossil Fuel Free Index will include companies that do not own fossil fuel reserves. Research firm RobecoSAM will track the financial performance of such companies.
Over the past few years, several stock exchanges have taken initiatives aimed at including environmental parameters in the investment strategies. The United Nations-backed Sustainable Stock Exchanges Initiative tracks such exchanges around the world that have implemented such measures.
According to the data released in August 2015, 59 stock exchanges around the world have implemented some sort of sustainability measures to provide guidance to the investors, or the listed companies themselves. 25 of these have sustainability-related indices operational. Some of the leading stock exchanges that have such indices include the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE), Nasdaq, London Stock Exchange, Euronext, Australian Securities Exchange, and Shanghai Stock Exchange.
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