Wilshire to launch Climate Change 1.5℃ Target Index with Nikkei and Hang Seng

Rick Steves

Wilshire has announced a collective launch with Nikkei and Hang Seng to bring to market the first in a series of indexes empowering investors to transition their investments towards a low-carbon and climate resilient economy.

Japanese index provider Nikkei -also the parent company of The Financial Times (FT) – and Hong Kong and mainland China index provider Hang Seng tapped Wilshire due to its ongoing strategic partnership with the FT.

Wilshire has become an industry reference for the development of the right tools to help investors make a meaningful impact when addressing Environmental, Social and Governance (ESG) risks within their investment portfolios.

Climate index series helps investors in decision-making

Mark Makepeace, Chief Executive Officer of Wilshire, commented: “We have a collective responsibility to identify and manage climate risks that lead to better long-term investment outcomes for our clients. I’m excited to be collaborating with leading companies like Nikkei and Hang Seng Indexes Company who share our vision and commitment to empower investors to move from climate takers to climate makers. Our climate index series is designed to help investors make informed decisions to redirect capital towards a low carbon and climate resilient global economy.”

President and CEO Tsuyoshi Hasebe of Nikkei Inc. said: “Nikkei is committed to the preservation of the environment and our planet. We are making efforts to do so with our news and commentaries, as well as through other activities herein Japan and abroad. The Nikkei 225 Climate Change 1.5℃ Target Index will offer opportunities for greater amounts of global investment capital to flow into the major Japanese corporations that are environmentally conscious. It will also support action to attain the goals of the Paris Agreement.”

Anita Mo, Chief Executive Officer at Hang Seng Indexes Company, added: “We are delighted to join hands with Wilshire to broaden the variety of our product suite to align with the carbon neutrality objective of the Paris Agreement. The launch of the Hang Seng Climate Change 1.5°C Target Index will help investors with awareness of climate risks to integrate climate action factors into investment strategy to reduce portfolio exposure to risks related to climate change and reach a net zero goal.”

Designed to meet stringent EU Paris Aligned Benchmark (PAB) standards, the index methodology facilitates investment into companies with the intent of targeting at least a seven percent reduction year on year.

PAB requirements aim to limit the rise in global temperature to no more than 1.5°C compared to pre-industrial levels by holding asset managers to account to invest in a portfolio which is reducing carbon emissions in line with the Paris Agreement of 2015, a global mandate that was endorsed by 197 sovereign nations.

The three major index providers will launch on May 30, 2022, their respective regional indexes applying the abovementioned PAB index methodology. These are:

FT Wilshire US Large Cap Climate Change 1.5℃ Target Index
Nikkei225 Climate Change 1.5℃ Target Index#
HangSeng Climate Change 1.5℃ Target Index

The new indexes can be licensed for issuing index-linked products, developing passive investment strategies, benchmarking investment performance for climate-related strategies, and strategic asset allocation guidance.

The 1.5℃ target index methodology requires the constituents of a portfolio to:

  • At least a 7% on average annual reduction in greenhouse gas (GHG) emissions
  • At least a 50% reduction in GHG emissions intensity compared to the underlying index
  • Incorporates the EU Taxonomy “Do No Significant Harm” (DNSH) criteria to provide an additional screening option of green exposure.
  • Remaining constituents are then weighted based on their Greenhouse Gas (GHG) Emission Intensities.

Constituents with lower GHG Emission Intensities will have an increased weight in the Index, while those who have higher intensities will have a reduced weight.

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