Solactive releases ‘Solactive right. 2 Degree-Aligned Europe Index’ based on right. based on Science’s XDC Economic Climate Impact Model
With numerous regulatory initiatives concerning sustainable finance, the European Union is currently setting the course for the area’s transition towards the <2°C scenario captured in the Paris Agreement. This shift creates a quest for innovative data to shape the investment solutions supporting this transition not only in Europe but on a global scale. Now Solactive, with the support of climate metrics and software provider right. based on science, developed a benchmark index, the Solactive right. 2 Degree-Aligned Europe Index, a broad portfolio of sector-leading European companies aligned with a 2°C global warming scenario through 2050.
In February 2020, Solactive placed a strategic investment into the Frankfurt-based scientific climate data start-up right. based on science (“right.”), thus expanding its engagement in the space of innovative ESG data providers. right.’s X-Degree Compatibility (XDC) Model calculates the contribution of an economic entity to climate change until 2050 under various scenarios. Results are expressed as a tangible °C value.
The Solactive right. 2 Degree-Aligned Europe Index selects companies from a broad range of sectors aligned with a 2°C scenario under baseline assumptions through 2050*, amounting to 260 constituents out of its underlying universe, the Solactive Europe 600 Index. This finding, in return, implies a current lack of 2°C-aligned business practice for more than 57% of the 600 largest European companies.
The design of Solactive’s new benchmark addresses three critical areas for clients looking for temperature-aligned portfolios. First, it uses a single metric – the XDC – and thus keeps the index design transparent and easy to understand. Additionally, in comparison to many existing approaches to temperature-alignment, the XDC is a forward-looking metric. Finally, while the Solactive right. 2 Degree-Aligned Europe Index is weighted by free-float market capitalization, the temperature alignment is independent of the weighting scheme, leaving clients with greater flexibility in designing similar strategies.
Steffen Scheuble, CEO of Solactive, comments: “Societal changes go hand in hand with a change in responsibilities. As an index provider, it is our onus to facilitate investing in a green future for the contemporary investor. We found that entering a strategic partnership with right. to develop a tangible and accessible 2° degree-aligned index was the right choice, and we are looking forward to disrupting the indexing business and the way people invest in a greener future with right. even more going forward.”
Hannah Helmke, CEO of right. based on science, comments: “Our aim in creating the XDC Model was to provide a transparent, tangible climate impact metric that can be used by financial actors, the real economy, and other market participants alike. Solactive has recognized this potential, and we are very pleased that the joint creation of temperature aligned indices, such as this one, can contribute to the redirection of capital flows towards more climate-friendly business practices.“
|*Baseline assumptions are a continuation of the historical rate of decoupling of Gross Value Added (GVA) and emissions following the Shared Socioeconomic Pathway 2-Scenario (SSP2).|