On the relevance of low-carbon stock indices to tackle climate change

Manuel Coeslier (1, 2) , Céline Louche (1) , Jean-François Hétet (2)

1 Audencia Business School
2 LHEEA - Laboratoire de recherche en Hydrodynamique, Énergétique et Environnement Atmosphérique

In a context where the necessary transition to a climate-resilient economy creates financing needs as well as new and underestimated financial risks for investors, low-carbon or carbonefficient financial indices represent a rapidly growing and promising instrument. By building and testing representative optimization methodologies for low-carbon stock indices, this study investigates their ability to both (i) allow investors to hedge against climate-related financial risks and (ii) promote companies with higher contribution to the energy transition. The analysis is based on a large European stock index for which we benefit from a complete set of bottom-up calculated environmental indicators, including indirect and avoided carbon emissions figures. The results indicate that mainstream low-carbon indices methodologies fail to address the challenges they are based on and call for further improvements in order to align diversified financial instruments with ambitious climate objectives.

Mots clés: Sustainable finance; lowcarbon indices; Carbon footprint; Financed emissions; Avoided emissions

Domaines: Gestion et management

Manuel Coeslier, Céline Louche, Jean-François Hétet. On the relevance of low-carbon stock indices to tackle climate change. Journal of Sustainable Finance & Investment, 2016, ⟨10.1080/20430795.2016.1223471⟩. ⟨hal-01356163⟩