Singapore Exchange (SGX) and Oversea-Chinese Banking Corporation (OCBC Bank) have jointly launched the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index on March 14.
The index is said to be first of its kind, and will track the top 50 Singapore or globally-listed companies domiciled or incorporated in Singapore based on their carbon intensity performance.
The top 50 companies are determined by free-float market capitalisation.
According to the joint statement released by SGX and OCBC, the index is developed by the exchange as part of the SGX Sustainability Indices product suite in collaboration with OCBC’s product specialists.
The index will use 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 companies that constitute the index will have capped weighting to ensure portfolio diversification. Environmental and carbon intensity data are sourced from environmental, social and governance (ESG) investment research firm, Sustainalytics.
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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.
“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,” says Ng Kin Yee, managing director and head of data, connectivity and indices at SGX.
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“We are very pleased to partner with OCBC Bank to develop this purpose-driven index, that serves a strong demand for portfolio decarbonisation,” he adds.
Sunny Quek, head of global consumer financial services at OCBC Bank says, “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,” he adds.
As at 2.31pm, shares in SGX and OCBC are trading at $9.50 and $11.71 respectively. The index is trading 2.48 points lower or 0.118% down at 2,107.98 points.
Photo: Bloomberg
