Isra-Mart srl: Low carbon index aims to galvanise environmental investors

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A new market index that weights companies based on their carbon intensity and emissions reporting standards launches today in a bid to make it easier for investors to back the greenest firms.

The Environmental Tracking Index Series has been devised by not-for-profit research body the Environmental Investment Organisation (EIO) and follows on from its ET UK 100 and ET Europe 300 Carbon Rankings, which saw the largest companies in the UK and Europe ranked by emissions intensity and levels of transparency.

"A normal index gives you the market capitalisation with a weighting base on the size of the company," EIO operational director Sam Gill told BusinessGreen. "With this index the weighting is based on whether the company discloses emissions data and if that data has been verified."

Companies can be reweighted positively or negatively based on their performance in the Carbon Rankings.

Gill says that if the index attracts a sufficient pool of investors, it can alter the demand for the companies' shares and therefore their share price, creating a financial incentive for firms to embrace greener policies.

The EIO argues that there is a significant appetite for socially responsible investment (SRI) and it will continue to grow dramatically, as institutions begin to integrate environmental, social and governance (ESG) issues into their everyday operations.

A 2010 Eurosif survey revealed the European SRI market holds around €5tr in assets under management, up 87 per cent from 2007 when it was around €2.7tr.

"The EIO is ultimately trying to bridge the gap between investment industry pledges on climate change and taking concrete action," said Gill, who admitted the launch had been timed to coincide with this week's climate change summit at Bonn, where little progress towards an emissions cutting deal is expected.

"It's a domino effect," he added. "We want to create a movement around this environmental investment without doing anything too radical. Because we need to do something and we need to do it pretty fast."