Index launched for investors seeking to divest from fossil fuels

The London Stock Exchange-owned FTSE Russell has launched the FTSE Divest-Invest index which will reduce investors exposure to fossil fuel companies while also increasing exposure within the index to companies engaged in the transition to a green economy.

FTSE Russell said it was able to achieve this using data captured from its new green revenue data model, called LCE, which will be publicly launched soon. The index provider also announced that BNP Paribas has licensed the new index to create swaps and structured products.

The index is constructed from the largest 200 companies in the FTSE Developed All-Cap Index FTSE Russell said. However then companies are excluded that are part of the industrial classification benchmark sectors and from sub-sectors that which include oil and gas companies and coal and general mining companies.

These excluded companies are replaced by green companies whose weights are based on their low carbon economy industrial indicator  factor. This factor is defined as a constituent’s ratio of its green revenues to its total revenues. This data is sourced from the LCE model, which is designed to capture changes in the revenue mix of companies as they increasingly provide goods, products and services that enable the world to adapt to, mitigate or remediate the impacts of climate change, resource depletion or environmental erosion.

Cian Fitzgerald, Head of UK Institutional Clients, Global Markets, BNP Paribas, said, “We see increasing appetite from our institutional investor client-base wishing to address climate change in their investment process. This index will enable us to bring to market products which satisfy the investment requirements of our UK institutional clients.”

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