S&P Dow Jones Indices (SPDJI) is making the most of the merger with IHS Markit earlier this year by creating a Paris-aligned climate bond index.
The iBoxx EUR Corporates Net Zero 2050 Paris-Aligned ESG index aims to meet the standard of the European Union’s Paris-aligned Benchmark (PAB) while also incorporating factors to address transition risk and climate change opportunities.
PAB indices target a 50% reduction in carbon intensity versus its parent index as well as a reduction in carbon intensity of 7% per year.
The indices are also aligned with the recommendations of the Financial Stability Boards’ Task Force on Climate-related Financial Disclosures (TCFD).
To be included in the index, a corporate bond’s maturity must be at least one year and have a minimum amount outstanding of €500m.
The corporate bonds selected in the index are weighted to be compatible with a 1.5°C global warming climate scenario. Each security’s weighting is capped at 5%.
Any securities in violation of the principles of the United Nations Global Compact (UNGC) or are involved in ESG controversies are excluded.
The index utilises multiple ESG data sources including S&P Global’s ESG data provider Trucost.
Smadar Shulman (pictured), head of fixed income indices, EMEA, at SPDJI, commented: “Our goal is to provide the market with end-to-end multi-asset benchmarking solutions that help facilitate and contribute to long-term sustainability as corporations and institutions transition and strive towards a low-carbon future.”
The iBoxx range is now part of SPDJI’s index house following completion of the IHS Markit merger in February in a deal worth $44bn.