IFC, a member of the World Bank Group, and Standard & Poor’s are launching the world’s first carbon efficient index for emerging markets that could mobilize more than US$1 billion for carbon-efficient companies over the next three years.
The Carbon Efficient Index will encourage carbon-based competition among emerging-market companies, give carbon-efficient companies access to long-term investors, and should lead to important reductions in carbon emissions in developing countries.
Rachel Kyte, IFC Vice President for Business Advisory Services, noted that there is growing pressure on investors to diversify and maintain returns by increasing exposure to emerging markets.
More and more investors are also keen to demonstrate a preference for sustainability, including carbon efficient companies.
“IFC hopes that the launch of this index will help ensure that carbon efficiency is rewarded in the market and that best-in-class companies gain better access to capital,” he said.
The index was developed by S&P using carbon data provided by Trucost. It will allow investors to closely track the performance of the S&P/IFC Investable Emerging Markets Index, a leading emerging-market benchmark.
Investors will gain exposure to emerging markets and benefit from local rates-of-return while reducing the carbon footprint of their portfolios by 24 percent.
“Investors increasingly view emerging markets as essential to a well-designed global equity portfolio, said David Blitzer, Chairman of Standard & Poor’s Index Committee.
“With the growing understanding of the role of carbon emissions in climate change, the S&P/IFC Carbon Efficient Index will be a powerful tool for investors seeking to reduce their carbon exposure in a broad portfolio covering emerging markets.”
The initiative is the result of a pioneering collaboration that draws upon S&P’s experience in index construction, Trucost’s expertise in analyzing and estimating carbon emissions, and the Carbon Disclosure Project’s leading engagement initiative to encourage public disclosure of carbon emissions.
IFC provided financial support to the S&P/Trucost consortium to accelerate the carbon research on emerging-market companies. It also provided technical support to help validate and refine the methodology, and it is supporting the Carbon Disclosure Project’s efforts to increase their emerging-market coverage by over 500 companies. The initiative also was supported by the United Kingdom’s Department for International Development and the Global Environment Facility.
IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with IBRD, it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by supporting low-carbon growth in those countries.
