STOXX Ltd. introduced the STOXX® Low Carbon index family in February to help investors reduce the carbon footprint of their portfolios. For the development of the index family, we partnered with the non-profit organization CDP (former Carbon Disclosure Project) and South Pole to use their emission-related datasets.
Our team at STOXX recently talked to Susan Dreyer, Country Director DACH Region at CDP Europe, about the power of measurement and information disclosure, the investors' role in addressing climate change and the effectiveness of our new indexes.
CDP data enables investors to analyze the environmental risks and financial opportunities across their portfolios, which was also shown to generate sustainable and often superior shareholder returns. This equips them to engage their investment portfolio companies on natural capital use and help protect their assets against the risks from climate change and also future regulation in this areas, and alert company management to these risks. We are extremely happy that through the STOXX index partnership we can now add substantial index coverage for investor benchmarks, some of which are not only innovative but first ever of its kind.
The STOXX Low Carbon Indices are a major building block in that process. What we really like about them is they not only allow and encourage investment flows into companies with lower emission intensities within their sector or universe, but also track universes of companies who report through CDP. The latter ensures that companies follow the acknowledged standardized CDP reporting framework and as such strategy path. It is particularly exciting to see one of the world's market leaders who owns famous indices like the EURO STOXX 50 or markets the DAX doing that. STOXX combined CDP and South Pole Group data into a comprehensive family of Low Carbon indices, catering different investor needs, helping them decarbonize and benefit from the transformation, which is good for them and good for the climate!
Value chain emissions, in particular emissions from the supply chain and through the usage phase of products, can account up to 3 times, in some sectors even 8 times the direct emissions a company produces. So not including and managing the value chain would leave out a significant part of a company’s responsibility and influence. It would for instance allow companies to simply outsource high-emitting processes. But climate change is a global problem, one ton emitted in China does the same damage as one ton emitted in Europe. So we can only solve it, and we can only successfully decarbonize, if the value chain is part of the management. Companies awarded the best-possible CDP Climate Score A and thus tracked in the STOXX Global Climate Change Leaders Index are showcasing how this can be done.