Trucost News / 13 May 2011

Legal & General Investment Management launch carbon efficient Index Tracker Fund

Legal & General Investment Management launch carbon efficient Index Tracker Fund using a custom index created by FTSE Group based on carbon data provided by Trucost.

Legal & General Investment Management (LGIM), a leading provider of investment services and products, with £356 billion funds under management as at end March 2011, and Trucost, the environmental data company, have launched a carbon efficient tracker fund.

LGIM UK Equity Carbon Optimised Index Fund is designed for pensions investors concerned about carbon risk, which in turn is a good proxy for energy risk. The fund aims to achieve returns close to the FTSE All-Share index while reducing exposure to financial risk from the transition to a low carbon economy and rising energy costs. The fund is sector neutral weighted compared to the FTSE All-Share but is around 20% less carbon intensive*.

The Fund has been developed by Legal & General Investment Management using a custom index created by FTSE Group based on carbon data provided by Trucost.

Neil McIndoe, Director of Partnerships at Trucost said: “Rising energy prices and the recent news that Drax slipped by 4.3% in response to the Budget measure to set a price floor for carbon credits, makes it increasingly important to enable investors to manage this financial risk.”

Mike Craston, Managing Director, Institutional Business, LGIM said: “LGIM has launched this fund in response to client demand for a carbon efficient tracker fund. We have worked closely with the BT Pension Scheme Management, the executive arm of the BT Pension Scheme (BTPS) to develop a fund which meets the requirements of the Pension Scheme. The fund will direct investment towards carbon-efficient companies and reduce fund exposure to rising carbon costs. Passive investors in particular should be drawn to the Index due to its lower carbon risk combined with a fund designed to deliver very low tracking error, compared to its benchmark.

“Although this fund has been developed for BTPS we are confident that the concerns that caused them to ask us to develop this fund will be shared by other pensions investors who will also invest in this fund to reduce carbon exposure risk.”

Helene Winch, Director, Head of Policy, BT Pension Scheme Management Ltd said: “As part of our ongoing analysis of the potential impacts of climate risk on our portfolio of assets, we have been actively exploring ways to efficiently allocate capital to investments that could outperform in times of higher carbon prices, particularly as a result of policy moves towards a low carbon economy. Alongside our partners of LGIM, Trucost and FTSE, the BT Pension Scheme is pleased to invest in this attractive, institutional-focused product.”

BTPS has indicated they will invest £100m into the fund.

David Harris, Director of Responsible Investment at FTSE said: “An increasing number of global institutional investors are integrating climate change considerations into their investments. The index that has been created specifically for the LGIM Carbon Optimised Index Fund demonstrates how FTSE is developing indices and custom solutions to support the integration of climate change into investments.”

The pioneering collaboration draws on LGIM’s fund management expertise, Trucost’s expertise in the calculation of corporate environmental impacts, and FTSE’s expertise in responsible investment and experience in developing market leading indices on a standard and customised basis. Trucost has been researching, standardising and validating corporate carbon emissions for over 10 years, providing LGIM with the all important ability to back-test the Fund’s performance. These tests have shown that the emissions attributable to the carbon efficient index’s components have been consistently 20% lower than the FTSE All-Share while the financial performance has closely tracked the FTSE All-Share. This gives investors the opportunity to reduce exposure to rising carbon costs in the future without sacrificing returns in the meantime.

 

Contact

sarah.wainwright@trucost.com

+44 (0)20 7160 9800

3 February, 2020
Events Green Finance Summit – Phoenix – 3 – 4, 2020

The GreenFin Summit follows a successful launch event in 2019. That invitation-only event brought together 100 corporate sustainability leaders, major public-sector pension fund executives and leading financial institutions, with over a trillion dollars of combined assets under management. The discussion broached vital topics in ESG that will be expanded upon at the 2020 Summit. Richard Mattison...

Find out more
Trucost News / 26 Nov 2019 Trucost launches Physical Risk Analytics to help assess risks and opportunities from climate change

New dataset and analytics enables investors, companies and governments to weigh risk of companies’ assets from physical impacts of climate change

Read news
Publication / 25 Nov 2019 Understanding Climate Risk at the Asset Level: The Interplay of Transition and Physical Risks

How could the interplay between regulatory transitional risks and physical risks impact the performance of companies across sectors and geographies?

Read publication

VIEW ALL NEWS & INSIGHTS