According to the announcement, the S&P U.S. Carbon Efficient Index will measure the performance of large cap U.S. companies with relatively low carbon emissions, while seeking to closely track the return of the S&P 500. The new Index – part of the Standard & Poor’s global thematic index series – provides a benchmark to the market, as represented by the S&P 500, while allowing investors to create financial products that seek to gain exposure from a more environmentally efficient perspective, S&P said.
The Index is comprised of constituents of the S&P 500 that have a relatively low Carbon Footprint, as calculated by Trucost Plc. The environmental data organization quantifies the environmental impact of over 4,500 companies across different sectors and geographies. Carbon Footprint is calculated as the company’s annual greenhouse gas emissions assessment (expressed as tons of carbon dioxide equivalent) divided by annual revenue.
The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their Carbon Footprint, and the 100 equities with the highest Carbon Footprints, whose aggregate exclusion does not reduce any individual GICS sector weight of the S&P 500 by more than 50%, are removed.
Through 2008, the average annual Carbon Footprint of the S&P U.S. Carbon Efficient Index was 48% lower than that of the S&P 500, according to the announcement.