Low Carbon Indices: A low cost first step for Net Zero 2050 alignment?
Low carbon indices are a potentially useful tool to reduce carbon exposure and are increasingly becoming accessible at reasonable cost through exchange-traded funds. The genuine impact they have on carbon emissions is reliant on the quality of underlying data supporting the index construction. However, such approaches and disclosures are coming under ever greater scrutiny, in particular as TCFD’s are becoming more mainstream.
Low carbon indices are sometimes perceived to be less effective when combined with risk management. Based upon recent experience, this need not necessarily be the case. It is possible for existing risk management approaches to still be combined effectively with environmental, social and governance low carbon tilts.