Fixed Income & Data Services/Index Solutions/Sustainability Indices

Sustainability Indices

ICE Data Indices has a range of index solutions to support the growing demand for responsible and sustainable investing.

These include fixed income sustainable benchmarks that account for Environmental, Social and Governance (ESG) factors, in addition to other criteria, and the Global Carbon Futures Indices which serve as benchmarks of the global price of carbon. Our Sustainability Indices1, which include corporate climate and ESG indices, green, social and sustainable bond indices, and sovereign carbon reduction indices, combine our fixed income capabilities with popular ESG strategy overlays.

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Climate Indices: helping progress toward net zero

Paris-Aligned and Climate Transition indices help investors benchmark to two of the most credible global frameworks on climate-related disclosures.

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Corporate Climate Indices

In response to the UN’s Intergovernmental Panel on Climate Change (IPCC), which determined that limiting global warming to 1.5°-2.0° Celsius is the best chance to avoid the worst consequences of climate change, the European Union (EU) and United Kingdom (UK) agreed to work towards achieving net zero carbon emissions by the year 2050. To achieve that goal, the Paris Agreement was signed by the EU and 192 countries.

The Climate Index series (“Climate Indices”) is a range of fixed income indices that incorporate ESG screening criteria along with a carbon reduction methodology to support the transition to net zero carbon emissions by 2050. The series includes indices that are subject to the requirements for labelling as Paris Aligned Benchmarks and Climate Transition Benchmarks, under EU and UK Benchmarks Regulation (BMR).

The Climate Indices start with an existing ICE Corporate bond index (the “Parent Index”). For each Parent Index, there are six climate variants designed to track different combinations of screening and carbon reduction approaches. All six of the index variants have certain common key elements but specific targets and/or exclusionary filters differ from one to the next.

Paris-Aligned Indices: The indices are subject to the requirements for labelling as Paris Aligned benchmarks under EU and UK BMR. Indices are available that measure carbon reduction in terms of absolute carbon emissions or in terms of EVIC-based carbon intensity. The indices exclude companies with fossil fuel exposure and require at least a 50% carbon reduction compared to the Parent Index.
Climate Transition Indices: The Indices are subject to the requirements for labelling as Climate Transition benchmarks, under EU and UK BMR. Indices are available that measure carbon reduction in terms of absolute carbon emissions or in terms of EVIC-based carbon intensity. The indices require at least a 30% carbon reduction compared to the Parent Index.
Net Zero Revenue Intensity Indices: The indices use an alternate measure of carbon intensity that divides a company’s absolute emissions by its revenues. Indices are available that either include or exclude companies with fossil fuel exposure.

Read Climate Indices rules & methodology

Corporate ESG Indices

Corporate ESG Indices can be used to filter out securities of companies with certain business involvement and tilt toward those companies with more attractive ESG risk scores. In addition to the data typically used when compiling bond indices (e.g. reference data, evaluations, credit ratings, etc.), Corporate ESG Indices also incorporate Sustainalytics ESG Ratings. History is available from 2016, providing insight into one of the most volatile periods of corporate bond indices. Corporate ESG Indices may employ any of the following methodologies:

ESG Tilt: Filter out companies with significant involvement in controversial weapons and tilt the weights of remaining constituents towards those with more attractive ESG risk scores.
Duration Matched ESG Tilt: The same as the ESG tilt method but with additional weighting adjustments to match the Parent Index interest rate exposure across rating and sector segments as closely as practicable.
ESG best-in-Class: Filter out companies with significant involvement in controversial weapons and/or less attractive ESG risk scores. The weights of remaining constituents are then adjusted to closely match allocations to rating and sector segments of the Parent Index. The Corporate ESG Index methodologies have been applied to a number of our flagship indices, including the ICE BofA U.S. and Euro Investment Grade and High Yield Indices. Global Government Carbon Reduction Indices.

Green, Social and Sustainable Index

With history going back to 2018, the Green, Social and Sustainable Index tracks securities issued for green, social or sustainable purposes. Qualifying bonds must have a clearly designated use of proceeds that is outlined in the ICMA Green Bond Principals, ICMA Social Bond Principles or the ICMA Sustainability Bond Principles. Green, social and sustainable use of proceeds are segmented into individual indices.

Sustainability-Linked Bond Index

The Sustainability-Linked Bond Index tracks the performance of securities issued for qualified sustainability-linked purposes. Qualifying bonds have coupons or a redemption price tied to specific goals contributing to sustainability (from an environmental and/or social and/or governance perspective) as outlined by the ICMA Sustainability-Linked Bond Guidelines.

Global Government Carbon Reduction Indices

Global Government Carbon Reduction Indices tilt the weights of constituent countries to lower the weighted average carbon footprint of the overall index while helping to minimize tracking error versus the starting capitalization-weighted Parent Index. The information used to compile the Global Government Carbon Reduction Indices is based, in part, on CO2 per capita data published in the Emissions Database for Global Atmospheric Research (EDGAR) Carbon Data Report. The methodology for the Global Government Carbon Reduction Indices has been applied to a number of our most popular Global, Euro and Emerging Markets Government Indices.

Carbon Futures Family Index

The Carbon Futures Index Family is made up of pricing from the four most actively traded carbon markets in the world: the European Union Emissions Trading Scheme (EU ETS), which started in 2005, the Western Climate Initiative (California Cap and Trade Program), which started in 2013, the Regional Greenhouse Gas Initiative (RGGI), which was established in 2009, and the UK Emissions Trading Scheme (UK ETS), which was created in 2021. Together these markets represent some of the largest regional economies in the world, and the secondary futures market for those programs which trade on ICE’s futures markets make up the majority of the volume in all carbon-based futures contracts.

ICE U.S. Carbon Neutral Power Index

The ICE U.S. Carbon Neutral Power Index provides a broadly representative performance benchmark for the U.S. electricity market on a carbon neutral basis, reflecting a backdrop where renewables will comprise a larger portion of the power generation fuel mix. For market participants, the index offers the ability to track a core commodity on a sustainable basis and the potential for unique investment diversification. For example, over its nine-year back test, the ICE U.S. Carbon Neutral Power Index has very low performance correlation to not only U.S. equity and fixed income indices but also to broad commodities and sector indices.

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