New Big Cap Equity Index to Reward Australia’s Climate Champions

Written by
James Thornhill
Written by

James Thornhill

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(Bloomberg) -- A new Australian equity index, developed by BNP Paribas SA and backed by the government's green bank, will support and reward 100 companies doing the most to stem climate change.

The French bank has issued A$140 million ($101 million) in green bonds linked to the Australian Climate Transition Index, offering institutional investors exposure to the country's biggest companies that are showing progress transitioning to a low-carbon future. The bonds are backed by a A$60 million cornerstone investment from the Clean Energy Finance Corp. and the proceeds will be used to invest in green projects.

“The index seeks to identify companies likely to perform well in a world undergoing a 2 degrees Celsius transition and to continue to play a part of the Australian economy in a 2°C future,” BNP Paribas said in a statement. It will include 100 equities, taken from within the ASX 300 index, “that will support the transition, adapt and thrive, or be least affected by the expected changes.”

Companies in the ASX 300 are responsible for 40% of Australia's emissions. The transition index's methodology takes into account a range of factors including energy efficiency and process improvements, the electrification of operations, including the use of electric vehicles, and fuel switching to renewable power.

In a world where investors are increasingly under pressure to meet higher environmental, social and government standards, the ACTI would give them a better line of sight on the climate risk in their share portfolios, Ian Learmonth, CEFC chief executive officer, said in a statement. It would also encourage ASX 300 companies to accelerate their emissions reduction efforts, he said.

Businesses that perform well on the ACTI may benefit from a lower cost of capital as investors seek greater exposure to companies seen to be leading the pack on climate responsibility, the CEFC said.

First State Super and QBE Insurance Group Ltd. also took part in the bond issue, with proceeds to be used to invest in a portfolio of green projects. The index was jointly developed by BNP Paribas, non-profit research body ClimateWorks, ISS ESG and Monash University.