In response to growing demand from institutions and individuals for investment strategies that address global warming, KLD Research & Analytics, Inc., based in Boston, Mass. has launched the Global Climate 100 Index. This is the first global index focused on solutions to climate change.
The Index is made up of large and small companies that KLD expects to offer near-term solutions to global warming through renewable energy, alternative fuels, clean technology and efficiency.
Says Thomas Kuh, Managing Director of KLD Indexes, industry momentum indicates strong demand for the Global Climate 100 Index. This year, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTERS) created their Green Wave Initiative, committing $1.5 billion to investments in innovative and responsible environmental companies. The Investor Network on Climate Risk, a group of pension funds and other institutional investors, launched a program to raise awareness about the financial risks posed by climate change.
“Pension funds are concerned about the financial risks associated with climate change,” said Kuh. “As fiduciaries with a long time horizon, they are looking for new strategies to integrate these factors into their investments. The Global Climate 100 looks ahead to show investors where the opportunities to address global warming will come from.”
KLD developed the Global Climate 100 Index in partnership with the Global Energy Network Institute (GENI), a non-profit research and education organization (www.geni.org). GENI will receive a portion of Index licensing fees, which will be dedicated to furthering its mission of promoting the development of electric power networks between nations and continents, with an emphasis on tapping abundant renewable energy resources.
The KLD Global Climate 100 Index allocates 1% to each of the 100 securities in the index to assure that large-cap companies do not unduly influence the performance of the index and to channel capital to small companies committed to preventing global climate change. This provides higher exposure to small-cap companies and lower exposure to large-cap companies than a cap-weighted index. Each quarter, KLD rebalances the Index to bring each holding back to 1%.
Companies in the KLD Global Climate 100 Index fall into three categories with roughly equal representation: renewable energy, future fuels, and clean technology and efficiency. Since it includes companies from a broad range of sectors – including oil, automotive, utilities, and financial services – the Global Climate 100 Index is more diversified than benchmarks for the renewable energy industry or the broader energy sector.
The companies come from 15 countries: 54% are from North America, 26% from Europe and 20% from the Asia-Pacific region.
KLD Research & Analytics, Inc. (www.kld.com) is an independent investment research and index company. Its products and services enable institutional money managers and investors to integrate social and environmental factors into their investment strategies. The company is known for the 15-year-old Domini 400 Social Index, the world’s first index to benchmark the performance of equity portfolios subject to multiple social screens. Today more than $8 billion is invested in funds based on KLD Indexes.
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