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Conceptualizing a Paris-Aligned Climate Index for the Eurozone What happens when Trucost’s physical risk data joins the power of S&P DJI ESG Scores?
BY Ben Leale-Green

EXECUTIVE SUMMARY

On the brink of irreversible climate change, a combination of ground-breaking datasets and index innovation is emerging, through which investors will have the choice to align their investments to a future climate scenario compatible with mitigating catastrophic global warming to the planet. This new breed of sustainable climate indices will not only offer solutions that intend to be impactful, but equally aim to provide investors with reduced risks from transitioning to a low-carbon economy and the consequences of physical, environmental events while capturing financial opportunities that arise.

Based on scientific evidence around the need for a 1.5°C global warming scenario to be hit (Masson-Delmotte, et al., 2018), the EU Technical Expert Group (TEG) has released its final report (The EU Technical Expert Group on Sustainable Finance, 2019), outlining two new climate benchmarks. This paper describes an S&P Dow Jones Indices (S&P DJI) concept for the eurozone region, which is aligned with the more stringent of these two new climate benchmarks: the Paris-Aligned Benchmark.

The index concept uses pioneering, forward-looking Trucost datasets to meet multiple climate objectives, aligned with a 1.5°C scenario and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, while incorporating the Science Based Targets Initiatives-endorsed climate transition approaches and state-of-the-art Trucost physical risk data.

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