S&P Dow Jones Indices has launched its Eurozone LargeMidCap Paris- Aligned Climate Index and S&P Eurozone LargeMidCap Climate Transition Index.

The new S&P Paris-Aligned & Climate Transition (PACT) Indices have been designed with a holistic approach to incorporate a broad range of climate and sustainability-based objectives. These include the climate objectives and minimum standards for the European Union (EU) Paris-Aligned Benchmark (PAB) and EU Climate Transition Benchmark (CTB) as specified by the EU Sustainable Finance Technical Expert Group (TEG) in its September 2019 Final Report on Climate Benchmarks and Benchmarks’ ESG Disclosure.

The EU created the PAB and CTB classifications and standards not only to fulfil risk reduction goals but also to create opportunities that will emerge as European economies transition to a low-carbon, climate resilient and more resource efficient one. In addition, the indices incorporate the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures’ (TCFD) recommendations for assessing climate-related risks, opportunities and financial impacts.

The indices measure the performance of eligible equity securities from the S&P Eurozone LargeMidCap Index, selected and weighted to be collectively compatible with a 1.5C global warming climate scenario and to meet several other climate-focused objectives. The indices are developed to help investors and other market participants align their investments and manage climate-related risks and opportunities.

In the coming months, S&P plans to launch additional Paris-Aligned and Climate Transition indices based on its other widely tracked regional and country-specific indices used in Europe, the US and developed markets.
S&P are also heralding a deeper partnership with iShares, the largest ETF issuer in the world, to deliver sustainable investing options based on S&P flagship US equity indexes. iShares will be the exclusive licensor of the indices for use with its exchanged-traded funds (ETFs) in the US, subject to obtaining customary approvals. The agreement brings together two brands in indexing and asset management to advance Environmental, Social and Governance (ESG) investment opportunities.

These ESG indices are designed to screen out companies that are in ongoing noncompliance with the United Nations Global Compact, fossil fuel extractors and other controversial companies while still seeking to maintain risk and return profiles similar to the flagship S&P equity benchmarks.

Carolyn Weinberg, global Head of iShares Product, said: “We have seen a surge in client demand for iShares Sustainable ETFs as clients turn to ESG not only for values, but for performance, risk management, and portfolio construction. iShares is democratising access to ESG – bringing it into the mainstream from a niche business available only to a few. The 2020 flows demonstrate this acceleration as iShares Sustainable ETFs accumulated almost $14bn in assets year to date, more than any other firm.”

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