Climate change index returns 22%!
“What distinguishes the GC 100 from other environmental indexes is its broad diversification of international companies focused on solutions to climate change rather than a single ‘pure play’ sector or geographic region,” said KLD managing director Tom Kuh in a release. “By design, there tends to be less volatility, and the companies are equally weighted in KLD’s Global Climate 100 Index.”
The Index includes large and small global companies at all levels of the value chain: producers, distributors, and consumers of renewable energies such as solar and wind, future fuels such as natural gas and hydrogen, and new technologies that help to reduce emissions of greenhouse gases.
“The Index is designed for investors seeking specialized strategies to invest in these types of companies. Increasingly, institutional and individual investors recognize that climate change is an investment issue - not just an environmental issue,” said Peter Kinder, president of KLD. “While these companies alone won’t fix global warming, the Index focuses investors’ attention on where the possibilities lie.”
“As fiduciaries with a long time horizon, (pension funds) are looking for new strategies to integrate these factors into their investments. The Index looks ahead to show investors where the opportunities to address global warming will come from,” he added.
These sentiments echo those shared by many in the international investment community, as the financially materiality of environmental, social and governance (ESG) factors becomes clearer. A recent report produced by leading asset managers for the United Nations Environment Programme’s Finance Initiative concluded that “there is robust evidence that ESG issues affect shareholder value in both the short and long term”.
Companies in the Index fall within three categories which are represented fairly equally: renewable energy, future fuels, and clean technology & efficiency. The diversification makes it more representative and less volatile than specific indexes for renewable energy or efficiency technologies.
The Index also includes energy utilities, oil and gas companies, and automotive firms, selected as leading their respective industries in climate change action. Representative companies currently in the index include Toyota and Honda for clean technology and efficiency in their vehicles, and Ballard Power Systems for their leadership position in fuel cell development.
Companies for the Index are drawn from 14 countries; fifty percent come from North America, while 22 percent come from Europe and 20 percent from the Asia-Pacific region.