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Morningstar introduces low carbon risk index

By The IJ Staff | February 01 2019 11:30AM

Morningstar, Inc. has introduced the Morningstar Low Carbon Risk Index Family. The investment research company says this new group of indexes “provides diversified exposure to equities across regions and emphasizes companies aligned with the transition to a low-carbon economy.”

Using Sustainalytics’ Carbon Risk Ratings, the indexes are created through an optimization process that targets low portfolio-level carbon risk and fossil fuel exposure, says the company.

Climate change impacts investors

"Climate change is a significant challenge that impacts investors," said Sanjay Arya, head of Indexes at Morningstar. "This new family of indexes will empower investors to evaluate and invest in companies that are adapting to the low-carbon economy and managing their businesses strategically for the long term. Whether motivated by environmental concerns, fiduciary obligations or investment outcomes, I believe the new indexes offer more options to lower carbon exposure without compromising returns."

Dan Lefkovitz, strategist for Morningstar Indexes says the indexes go beyond the common approach of carbon footprinting, which reflects current emissions. He sees that as just a starting point for analysis of carbon risk. "Our new Morningstar Low Carbon Risk Indexes are the first to leverage Sustainalytics' Carbon Risk Ratings – which assesses not only a company's overall carbon exposure but also its management of that exposure – to ultimately evaluate whether a company is positioned to survive and thrive in a low-carbon economy."

To learn more, consult the company’s white paper, Preparing for a Low Carbon Economy.

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