FTSE Russell expands climate risk-adjusted government bond index

The newly launched FTSE Climate Risk-Adjusted European Monetary Union (EMU) Government Bond Index (‘Climate EGBI’) expands FTSE Russell’s range of climate risk-adjusted government bond indexes and follows the launch of the ‘Climate WGBI’ in July 2019.

The new index, developed in response to customer demand, provides a forward-looking assessment of the climate risks faced by sovereigns within the EMU. This includes an assessment of the expected economic impact of transitioning to greenhouse gas emissions levels aligned with the Paris Accord target of less than 2C by 2050, known as transition risk.

Tilts are then applied towards sovereign markets that, on a relative basis, demonstrate a greater degree of resilience and preparedness to the risks of climate change. This results in a reduction in both climate risk of 16 per cent over a back tested period to 2001 and GHG emissions of 7 per cent compared to the underlying market-value weighted European Government Bond Index (EGBI) over the same period.

The Climate EGBI was developed using climate scores from Beyond Ratings, London Stock Exchange Group’s ESG analytics provider.

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