The environmental impact data provided by Trucost can be used to tilt, or re-weight stock indices to provide a formulaic means of incorporating environmental performance into investment decisions. In order to carry out this analysis effectively, the data set must be quantitative to provide weightings for each company, and it must cover all companies within the base index to properly reward good environmental stewardship.

Environmental performance or disclosure relative to sector

Environmental performance or disclosure relative to index

Exclusionary screen based on environmental performance or disclosure

Once the environmental criteria and extent of weighting have been customised, the weightings can be downloaded from the client's secure site or supplied to Trucost at regular intervals. Trucost's external cost data can also be used to report environmental performance to offset the potential financial costs of ethical investing.

To illustrate how this process works, Trucost has created three sample portfolios, based on a market capitalisation weighted index of the FTSE companies, to see what impact these three approaches have on the performance of the portfolio. This is not designed to be a definitive study of the possible link between environmental performance and share price reurns, it is an example of how Trucost's data can be used to construct these portfolios. The details of how these test portfolios were constructed and their performance results can be found in 'Constructing Environmentally Tilted Indices' (Click on the link to download in Adobe Acrobat .pdf).

If you wish to discuss your requirements please call Trucost on +44(0)20 7321 3833 or email fundmanager@trucost.com