ICE launches carbon-neutral U.S. electricity futures index

Rick Steves

“This index will assist us in developing financial instruments that provide investors exposure to exchange-traded electricity futures and carbon offsets, while having the ability to use the ICE U.S. Carbon Neutral Power Index as a benchmark.”

Intercontinental Exchange has launched the first carbon-neutral U.S. electricity futures index as the market focuses on the build-out of North American renewable generation and its impact on U.S. power prices.

The ICE U.S. Carbon Neutral Power Index provides investors with a benchmark that contains exposure to the critical North American power markets.

Broadly representative of U.S. electricity consumption and price

With the utilization of the six major U.S. power pools, the ICE U.S. Carbon Neutral Power Index will be broadly representative of U.S. electricity consumption and price.

The ICE U.S. Carbon Neutral Power Index consists of:

  • twelve months of ICE-listed electricity futures contracts from six major U.S. power pools
  • carbon allowance futures contracts designed to offset the emissions of the generation associated with these electricity futures contracts.

Electricity is the second largest energy component of the CPI

Varun Pawar, Vice President, Head of ICE Data Indices, said: “Electricity is the second largest energy component of the Consumer Price Index and is not directly included in any of the existing major commodity indices. This rules-based index developed by ICE with methodology licensed from Carbon Neutral Investment Company LLC (CNIC) has the ability to be a preferred financial instrument for investors who are looking for sustainable North American commodity exposure in their portfolios.”

Donald R. Sinclair, Chairman of CNIC, commented: “We are proud to have licensed our methodology as part of the ICE U.S. Carbon Neutral Power Index. This index will assist us in developing financial instruments that provide investors exposure to exchange-traded electricity futures and carbon offsets, while having the ability to use the ICE U.S. Carbon Neutral Power Index as a benchmark.”

ICE launched ESG Bond Index Family

Last year, Intercontinental Exchange launched a suite of corporate bond climate indices, part of the ICE ESG Bond Index Family, which supports the growing demand for responsible and sustainable investing.

Designed to capture the Paris Agreement goal of achieving net zero carbon emissions by 2050, the suite of corporate bond climate indices leverage 23 of ICE’s corporate bond benchmarks to create a family of 138 climate indices, many of which are labelled as Paris Aligned benchmarks and Climate Transition benchmarks.

For each benchmark index, ICE has created six climate variants using different screening and carbon metrics that all target a reduction in the aggregate carbon emissions of constituents to net zero by 2050.

ICE’s ESG bond indices leverages the existing benchmark such as the ICE BofA Fixed Income Indices, to create a broad range of benchmarks that match the growing demand for responsible and sustainable investing.

The fixed income sustainable benchmarks and ICE’s Global Carbon Futures Indices serve as benchmarks for the global price of carbon.

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