The University of Cambridge and Bloomberg have unveiled what they claim to be “the first fixed-income index to exclude companies involved in, or financing the development of fossil fuels”.
The ‘BCam’ index exclude companies in thermal coal, oil and gas value chains, as well as electric utilities that are expanding their production and use of fossil fuels.
They also underweight and exclude banks that finance fossil fuel expansion, insurers that offer insurance services to the fossil fuel sector, and companies “not phasing out [fossil fuels] sufficiently”.
Typical ‘green’ indices allow investors to exclude the entire fossil-fuel sector, or those issuers generating a certain proportion of revenues from coal, oil or gas, but it is unusual for an index to pinpoint constituents involved specifically in expansion activities.
Researchers at Cambridge University have been working on the index design for the past three years, with the support of a group of asset owners including the Californian State Teachers Retirement System, the UK-based Universities Superannuation Scheme and Swiss national pension fund, Publica.
Last year, the United Nation’s $88bn (€76bn) staff pension fund said it would allocate up to $500m to a strategy tracking the index once it was launched, although it has not confirmed whether it will use the BCam index. Cambridge University’s Treasury will invest up to £200m against the index. The news comes amid a flurry of recent activity in the sustainable index space.
French pension reserve fund FRR launched a climate transition-focused equities index last month, which it will allocate €100m to.
A week earlier, Standard Life announced plans to transition £60bn of listed assets to corporate bond and public equity indices “designed to help manage climate-related risk through alignment with the goals of the Paris Agreement”.
They will overweight companies “believed to be aligned to the transition, and those investing in the transition through climate solutions”.
Meanwhile, Dutch pension giant APG Asset Management signed off on a custom index for emerging markets.
The index is based on a non-sustainability-focused emerging markets index from Stoxx, but has been tweaked to include additional sustainability aspects in line with the priorities of APG’s client, ABP.
