The Global Climate 100 Index – the first global index focused on solutions to climate change – marked its first year with a total return of 22.22% from its launch on July 1, 2005. The Index had a strong return compared to 17.50% for the MSCI World Index for the same period.
KLD Research & Analytics, Inc., a pioneering SRI investment research and index provider, created the Index.
“What distinguishes the GC 100 from other environmental indexes is its broad diversification of international companies focused on solutions to climate change rather than a single ‘pure play’ sector or geographic region,” says Tom Kuh, managing director of KLD. “By design, there tends to be less volatility, and the companies are equally weighted in KLD?s Global Climate 100 Index.”
KLD’s Global Climate 100 Index includes both large and small global companies across the value chain – producers, distributors, and consumers of renewable energies such as solar and wind, future fuels such as natural gas and hydrogen, and innovations or applications of new technologies that help to reduce emissions of greenhouse gases.
“KLD’s Global Climate 100 Index is designed for investors seeking specialized strategies to invest in these types of companies. Increasingly, institutional and individual investors recognize that climate change is an investment issue – not just an environmental issue,” says Peter Kinder, president of KLD. “While these companies alone won’t fix global warming, the Index focuses investors’ attention on where the possibilities lie.”
Pension funds are particularly concerned about the financial risks associated with climate change. “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,” he said.
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.
Representative companies currently in the index include: Toyota Motor Corporation and Sekisui Chemical Co., Ltd. for clean technology and efficiency; Abengoa SA and United Technologies Corporation for future fuels; and Royal Dutch Shell PLC and Evergreen Solar, Inc. for renewable energy.
The 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 come from 14 countries, reflecting a broad geographical distribution. Fifty percent of the companies are from North America, 22 percent from Europe and 20 percent from the Asia-Pacific region, including Japan.
Another milestone was the launch on June 30, 2006 of Shinko Investment Trust Managements; new Chikyuryoku fund, the first environmental index fund in Japan, which is indexed to KLD’s Global Climate 100 Index. The fund trades under the ticker symbol 06312066 JP (Bloomberg ticker).
www.KLDIndexes.com
KLD GC 100 Index Cumulative Total Return Since Inception
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