Thursday, 6 October 2022

SGX and OCBC launch low carbon index

5 min read

Singapore Exchange (SGX) and OCBC Bank jointly launched the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index tracking the top 50 companies by free-float market capitalisation that are representative of Singapore’s real and financial economy.

Developed by SGX as part of the SGX Sustainability Indices product suite in collaboration with product specialists from OCBC, in line with the group’s ongoing sustainability effort, the index uses an exclusionary methodology to remove companies that have a heavy involvement in the fossil fuels sector, while upholding best-in-class selections based on Scope 1 and Scope 2 greenhouse gas emissions (GHG) per unit of revenue.

The resulting top 50 companies by market capitalisation will constitute the index with capped weighting to ensure portfolio diversification. Environmental and carbon intensity data are sourced from Sustainalytics, a responsible investment research firm specialised in environmental, social and governance.

Ng Kin Yee, managing director and head of data, connectivity and indices at SGX said, “The global green awakening has seen investors paying close attention to the actual carbon profile of companies, over and above green targets. Interest levels and references made on our sustainability indices have grown year on year with the launch of SGX Sustainability Indices suite in 2016 and the expansion of our ESG indexing capabilities following the acquisition of Scientific Beta in 2020. We are very pleased to partner with OCBC to develop this purpose-driven index that serves a strong demand for portfolio decarbonisation”.

Sunny Quek, head of global consumer financial services of OCBC said, “In recent years, the financial sector has evolved from treating sustainability as part of risk management to now seeing it as a viable business strategy and direction. We hope that our efforts will resonate with the wider community and create a green ripple effect amongst other financial players and industry leaders".

"Given the focus and efforts on sustainability by the bank, this index is a good example of how we ‘walk the sustainability talk’ and reinforce our commitment to work towards low-carbon economies. We shall continue the momentum to create and maintain a sustainable environment for future generations,” Quek said.

The impact of portfolio decarbonisation in this index is measured through its weighted average carbon intensity (WACI), a metric recommended by the Task Force on Climate-Related Financial Disclosures (TCFD) for reporting by asset owners and managers to their beneficiaries and clients. Historically, this index has achieved an average of 50% reduction in WACI when compared to a standard cap-weighted index.

Re-disseminated by The Asian Banker

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