Global index and data provider FTSE Russel has launched a new model and index to track companies that generate green revenues.
The Green Revenues Index Series is based on FTSE Russel’s Low Carbon Economy (LCE) data model, “a quantitative data model, specifically designed for benchmarking changes in industrial output as companies transition towards the Low Carbon or Green Economy.” The new Series will measure the green revenues of 13,400 public companies, which together represent 98.5% of total global market capitalization. Specifically, the Green Revenues Index Series has mapped a broad range of large, mid, and small capitalization companies from 48 developed and emerging markets to 60 new green industrial subsectors, allowing FTSE Russel to assign each company a low carbon industrial indicator (LOWCII) factor, which represents the ratio of its green revenues to its total revenues.
The model and Index Series show that green revenues are already being generated from more than 2,400 public companies across the 60 green industries, with “large cap companies increasingly involved in the delivery of green goods, products, and services.” Further, analysis of FTSE’s Global Equity Index Series shows that nearly 7.2%, or $2.9 trillion, of the index value is derived from green revenues, compared to 8.3% or $3.5 trillion from FTSE’s Emerging Markets index.
“FTSE Russell has long been a pioneer in the development of ESG benchmarking tools,” explained Mark Makepeace, Chief Executive of FTSE Russell. “As such, we identified a significant gap in the ability of portfolio managers to track exposure to the increasing shift towards a green economy. We calculate that the green opportunity is equitable in size to emerging markets, and the launch of our green revenue data model, and related indexes, provides the missing piece for investors, with a framework that captures the full picture of their green revenue exposure for the first time.”
Currently, the top constituents in FTSE’s Green Revenues Index for ‘All-World’ are lead by Apple, Microsoft, and surprisingly, Exxon Mobil Corporation.
“FTSE Russell’s Green Revenues Index Series and data model offers a unique and potentially powerful new way of assisting investors switch capital towards companies walking the talk in terms of green products, goods and services,” added Christiana Figueres, Executive Secretary of UN Framework Convention on Climate Change (UNFCCC). “The long term success of the Paris climate agreement will hinge on the greening of trillions of dollars of investment over the coming years and decades. Initiatives like this can, if widely used, play a real role in assisting asset managers and owners to accelerate the necessary transition to a green economy.”
Data and images from FTSE All-World Green Revenues Index (PDF)
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