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How climate indexes can support a net-zero strategy

clock 5 minute read

Climate benchmarks can help investors to implement net-zero-aligned strategies in a consistent way, avoid stranded assets, identify green opportunities and encourage portfolio companies to develop climate-resilient business models.

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Integrating climate concerns

Climate indexes can be an effective tool to help investors make climate considerations part of their strategies. Investors can use such indexes to help construct equity and fixed-income portfolios that shift investment to issuers that see opportunities from the transition to net-zero and away from those in carbon-intensive sectors. Owners and managers of assets, including pensions and sovereign wealth funds, asset and wealth managers, hedge funds, insurers and other professional investors can use climate indexes to:

  • Integrate climate considerations into their strategies
  • Measure the carbon footprint of their portfolios
  • Monitor the climate alignment of portfolios

Climate indexes can be designed to reduce fossil-fuel exposure, mitigate transition and physical risks, and align with global temperature targets.

How investors use climate indexes

The Swiss pension fund PUBLICA started in 2015 to factor environmental, social and governance risks into its investment decision-making. Since then, the fund has continued to broaden its consideration of climate risk, culminating in a decision last year to factor climate change into an equity portfolio of more than 6,000 companies. Patrick Uelfeti, PUBLICA’s deputy chief investment officer, spoke recently with MSCI’s Christine Chardonnens about what’s next, and some of the implementation challenges along the way.

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Climate Indexes Made Simple. How equity and fixed-income indexes can be a tool for constructing climate-resilient portfolios.