Putting the power in index investors’ hands

Since the advent of the 2015 Paris Agreement when the world came together to agree to limit global temperature increase this century to 2°C above preindustrial levels, investors have wrangled with how to invest for positive climate impact.

For many investors, active approaches to climate investing were neither affordable nor appropriate and the first generation of low carbon indices were insufficient. With the introduction of new climate index labels in the EU regulation, investors will soon have a new way to make a difference.

In a move that underlines the important role of finance, and index management in particular, in transitioning to a low carbon economy, the EU assembled a panel of experts from the investment industry, academia and sustainability practitioners to develop the index labelling. In doing so provide investors with clear and transparent guidelines in sustainable investing. 

A dual approach

The EU labelling uses a dual approach to offer investors flexibility and encourage widespread adoption; Climate Transition Benchmarks (CTB) targeting 30% reduction in carbon intensity compared to the parent index, and the Paris-Aligned Benchmarks (PAB) taking a stronger approach with a 50% carbon intensity reduction and additional activity exclusions. 

By maintaining high levels of diversification and limited tracking error to the parent index, the new climate change indices can replace traditional geographical exposure in portfolios while delivering significant levels of impact.

Comprehensive index methodologies

The Amundi ETF climate solutions use the MSCI World Climate Change[1] and the iStoxx Ambition Climat PAB indices, both follow comprehensive positive and negative screening, reweighting and scoring methodologies to deliver on their carbon reduction objectives.

Additionally, they use historical data on emissions scope 1 (direct), scope 2 (purchased electricity) and scope 3 (all other indirect emissions) of greenhouse gas (GHG) emissions to explicitly allocate to the most climate positive companies. This backwards-looking analysis is combined with forward-looking approaches considering company strategy and transition risks associated with carbon emissions.

Comparing climate change investing to traditional low carbon investing

Low carbon style investing is not entirely new. For example, Amundi co-developed the MSCI Low Carbon Leaders index series with FRR and AP4 in 2014.

However, the new generation of climate change indices, reinforced by the regulatory framework of the CTB and PAB labels[2], provides a more comprehensive approach to investing for positive impact. These new indices deliver an enhancement to older indices by:

  • Considering commitments from companies to reduce their GHG emissions

  • Taking into account all GHG emissions scope 1 (direct), scope 2 (purchased electricity) and scope 3 (all other indirect emissions) where historically low carbon indices only considered scopes 1 and 2.

Using one of the new future CTB or PAB labelled climate change indices gives investors comfort in knowing that the measurement of the carbon intensity is interpreted through the full value chain and that the management of the index takes a more proactive and future-focused approach.

Tracking climate change indices with Amundi ETFs

Investors now have the opportunity to incorporate climate-positive “off-the-shelf” index products into their portfolios. The Amundi ETF climate strategies, as part of a broader Responsible investing suite, offer a number of compelling advantages:

  • Transparent and standardised product
  • Simple to incorporate as a building block within existing portfolio
  • Cost-effective[3]
  • Significant carbon reduction

Amundi Climate Change ETF Range

ISIN

OCF[4]

World Equities

   

AMUNDI INDEX MSCI GLOBAL CLIMATE CHANGE UCITS ETF DR - EUR (C)

LU1602144229

0.25%

AMUNDI INDEX MSCI GLOBAL CLIMATE CHANGE UCITS ETF DR - USD (C)

LU1602144492

0.25%

Eurozone Equities

   

AMUNDI EURO ISTOXX CLIMATE PARIS ALIGNED PAB UCITS ETF DR (C)

LU2182388582

0.18%

Europe Equities

   

AMUNDI INDEX MSCI EUROPE CLIMATE CHANGE UCITS ETF DR (C)

LU2130768844

0.18%

AMUNDI MSCI EUROPE CLIMATE PARIS ALIGNED PAB UCITS ETF DR (C)

LU2182388319

0.18%

Visit amundietf.com or email info@amundietf.com to find out more.

[1] These indices are is not currently labelled CTB, however Amundi is hopeful that this index will meet CTB guidelines subject to a full review by MSCI in H2 2020. 

[2] Awaiting release of the final legislation.

[3] We consider the ETFs to be a cost-effective way to deliver climate change exposure compared to active strategies.  Amundi seeks to be competitively priced across their entire ETF range.

[4] Ongoing charges – annual, all taxes included. The ongoing charges represent the charges charged to the fund over a year. Until the fund has finalized its first financial accounts, the ongoing charges are estimated. Transaction cost and commissions may occur when trading ETFs.

Disclaimer

Main Risks: Investment in a Fund carries a substantial degree of risk such as Risk of capital loss - Underlying risk - Volatility Risk. Before any investment, please read the detailed descriptions of the main risks in the KIID and prospectus.

Important information: This document is not intended for citizens or residents of the United States of America or to any “U.S. Person”, as this term is defined in SEC Regulation S under the U.S. Securities Act of 1933. The “US Person” definition is provided in the legal mentions of our website www.amundi.com.

Investors are subject to the risk of loss of capital. Promotional & non-contractual Information which should not in any way be regarded as investment advice, an investment recommendation, a solicitation of an investment offer, or a purchase of any financial securities. The accuracy, completeness and relevance of the information, forecasts and analyses provided are not guaranteed.

They have been prepared from sources considered reliable and may be altered without prior notice. The information and forecasts are inevitably partial, provided on the basis of market data observed at a particular moment, and are subject to change. This document may contain information from third parties that do not belong to Amundi (“Third Party Content”). Third Party Content is provided for information purposes only (for illustration, comparison, etc.). Any opinion or recommendation contained in Third Party Content derives exclusively from these third parties and in no circumstances shall the reproduction or use of those opinions and recommendation by Amundi AM constitute an implicit or explicit approval by Amundi AM. Information reputed exact as of July 2020.

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