ESG Club
Beyond this, the primary difference is in the indices’ respective levels of climate intensity. The PAB integrates a more stringent carbon footprint reduction and a more restricted investment universe than the CTB.
Laurent Trottier is global head of ETF, indexing and smart beta management at Amundi
CLIMATE INDICES: ARE THEY MEETING THEIR OBJECTIVES?
As attention turns to the COP26 Climate Change Conference, the urgency of the climate crisis has never been more pal- pable. Years of unsustainable practices have brought our planet to breaking point. For investors committed to a sus- tainable future, here we look at the pro- gress of the Benchmarks Regulation in directing passive assets to address cli- mate change.
In 2018 the European Commission pub- lished its “Action Plan on Sustainable Finance¹”. As part of this programme, two
new categories of benchmark
emerged under the Benchmarks Regula- tion² – Climate Transition Benchmarks (CTB) and Paris-aligned Benchmarks (PAB). The establishment of these catego- ries of benchmark within the EU regula- tion acknowledged the importance of re-directing passively invested assets towards tackling the climate emergency. The CTB and PAB must comply with strict minimum requirements to achieve their climate objectives. Both types of index require the exclusion of companies that have a negative impact on key envi- ronmental
aspects, such as climate
change, pollution, marine protection and biodiversity, as well as companies that are involved in controversial weapons.
It has now been a year since the launch of CTB and PAB funds. The question is, how successful have they been in meeting their decarbonisation objectives com- pared to their parent index?
Amundi launched a range of CTB and PAB ETFs in 2020.
In assessing their
impact, we look at the two Amundi cli- mate ETFs that have attracted the most investor interest; these ETFs offer global equity exposure, tracking the MSCI World Climate Change Paris Aligned Select index and the MSCI World Change CTB Select index.
Climate
The primary areas we look at based on the requirements of the benchmarks are the index carbon emissions and the index car- bon intensity (see chart below) where we see a marked reduction versus the parent index. Investors have many reasons to choose climate ETFs – and for this reason,
Source: MSCI as at July 30, 2021
duce climate investing into their portfolios. Since Amundi became one of the first asset managers to launch a PAB- aligned ETF in 2020, we have seen strong demand from ETF investors who now have the choice of almost 50 different low carbon, fossil fuel free or climate change ETFs. Amundi now offers a range of PAB and CTB ETFs covering equity and fixed income and a range of geographical exposures.
Source: MSCI as at July 30, 2021
we believe it is important to offer a range of solutions to meet different needs. For example, for some investors, their priority could be managing climate-related risks such as stranded assets. From that per- spective, the data in the chart above dem- onstrates a clear reduction in exposure to companies that play a role in increasing
To learn more visit:
https://www.amundietf.co.uk/professional/ Investing-in-ETF/Climate-Investing
1) Source: European Commission
https://ec.europa.eu/info/ publications/sustainable-finance-renewed-strategy_en, March 2018
2) Source: ESMA
https://www.esma.europa.eu/policy-rules/ benchmarks
PI Partnership – Amundi
fossil fuel and carbon emissions and may suffer premature write-downs or devalua- tions as we move from fossil-fuel led power to climate-friendly solutions. Another reason for investing in climate may be an investor’s belief in exposure to innovative sectors with long-term poten- tial. The CTB and PAB indices have greater exposure to clean technology solutions.
These indices provide a more comprehen- sive approach for index investors to intro-
Important information This promotion is issued by Amundi (UK) Limited, registered office: 77 Coleman Street London EC2R 5BJ. Amundi (UK) Limited is authorised and regulated by the Financial Con- duct Authority under number 114503. This document is not intended for citizens or residents of the United States of America or any “U.S. Person”, as this term is defined in SEC Regulation S under the U.S. Securities Act of 1933. The “US Person” definition is provided in the legal mentions of our website
www.amundi.com. The content of this advertisement is for information purposes only and does not constitute a recommendation to buy or sell. The Funds have not been registered in the United States under the Investment Company Act of 1940 and units/shares of the Funds are not registered in the United States under the Securities Act of 1933. “Amundi Index Solutions”, a Luxembourg SICAV, RCS B206810, located 5, allée Scheffer, L-2520 Luxembourg. The sub-funds were approved for public distribution in Luxembourg by the Commission de Surveillance du Secteur Financier of Luxembourg.
32 | portfolio institutional | November 2021 | issue 108
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