On the relevance of low-carbon stock indices to tackle climate change

Manuel Coeslier (), Céline Louche () and Jean-François Hétet
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Manuel Coeslier: Audencia Business School, LHEEA - Laboratoire de recherche en Hydrodynamique, Énergétique et Environnement Atmosphérique - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique
Jean-François Hétet: LHEEA - Laboratoire de recherche en Hydrodynamique, Énergétique et Environnement Atmosphérique - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique

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Abstract: In a context where the necessary transition to a climate-resilient economy creates financing needs as well as new and underestimated financial risks for investors, low-carbon or carbonefficient financial indices represent a rapidly growing and promising instrument. By building and testing representative optimization methodologies for low-carbon stock indices, this study investigates their ability to both (i) allow investors to hedge against climate-related financial risks and (ii) promote companies with higher contribution to the energy transition. The analysis is based on a large European stock index for which we benefit from a complete set of bottom-up calculated environmental indicators, including indirect and avoided carbon emissions figures. The results indicate that mainstream low-carbon indices methodologies fail to address the challenges they are based on and call for further improvements in order to align diversified financial instruments with ambitious climate objectives.

Keywords: Sustainable finance; lowcarbon indices; Carbon footprint; Financed emissions; Avoided emissions (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-hme and nep-sog
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Published in Journal of Sustainable Finance & Investment, 2016, ⟨10.1080/20430795.2016.1223471⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01356163

DOI: 10.1080/20430795.2016.1223471

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