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S&P launches US Carbon efficient index

Standard & Poor’s, the world’s leading index provider, today announced the launch of the first in a series of global low carbon indices to meet the growing investor demands for environmentally focused indices.
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, which is 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.

“Organizations around the world are paying greater attention to the impact of greenhouse gases on our climate, as increasingly more investors consider carbon efficiency as an important investment theme,” said David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s Index Services.

“Standard & Poor’s is the first independent index provider to offer a broad U.S. market index with an environmental focus, reinforcing our position as the premier provider of global thematic focused indices.” With the addition of the S&P US Carbon Efficient Index to the global thematic family, the series will now cover such green themes as Water, Forestry, Eco and Carbon efficiency.

To reflect its carbon efficiency, the Index is comprised of constituents of the S&P 500 that have a relatively low Carbon Footprint, as calculated by Trucost Plc. Trucost, the environmental data organization quantifies the environmental impact of over 4,500 companies across different sectors and geographies. Trucost calculates the carbon intensity of companies in the S&P U.S. Carbon Efficient Index by researching and standardizing publicly disclosed information and engaging directly with companies to verify its calculations on an annual basis.

Carbon Footprint is calculated as the company’s annual greenhouse gas emissions assessment (expressed as tons of carbon dioxide equivalent) divided by annual revenue.

“With the world’s most st comprehensive database of corporate carbon emissions, Trucost is uniquely able to provide Standard & Poor’s with information to significantly reduce the carbon exposure of its Index,” said Simon Thomas, Chief Executive of Trucost Plc.

The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their Carbon Footprint. The 100 equities with the highest Carbon Footprints, whose aggregate exclusion does not reduce any individual GICS(i) sector weight of the S&P 500 by more than 50%, are removed.

Historically, the choice to maintain at least 50% of each GICS sector weight provided the greatest reduction in carbon footprint while closely tracking the return of the S&P 500. Standard & Poor’s also excludes companies, if any, which have not yet been assigned a Carbon Footprint by Trucost.

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.

Source: Standard & Poor’s, 10.03.2009

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