Many investors are seeking new ways to address their climate action goals and investment return objectives at the same time. A changing climate and the transition to a low-carbon economy present material investment risks as well as opportunities. It is time to raise the focus on company management, how they are addressing climate change, and the impact this can have on company performance over time.
New insights from Morningstar - based on the Morningstar Low Carbon Transition Leaders Indexes - supports the notion that companies on the leading edge of climate change can often exhibit leading-edge market performance.
The new index series, introduced earlier this year, considers a company’s current carbon intensity, as well as a management score from the Sustainalytics Low Carbon Transition Ratings to identify companies leading their peers in an approach to climate transition.
The Morningstar US Low Carbon Transition Leaders Index has risen 26.6% in 2024 as of October 11, more than 400 basis points above the Morningstar US Market Index (22.3% for the same time period), fueled by particularly strong performance by top holdings NVIDIA Corp. (NVDA), Microsoft Corp. (MSFT), and Google parent Alphabet Inc. (GOOG).
Rob Edwards – Global Director of ESG Product Management, Morningstar Indexes:
“Investors are focusing on the growing market impact of climate change, whether for managing investment risk or pursuing investment opportunity. Our indexes offer a simple and transparent way to identify and invest in the companies best positioned to thrive and survive in this scenario. Our low carbon leaders are companies with management that understand how to evolve their business in this context to protect and grow their market share and innovation.”
The Morningstar US Low Carbon Transition Leaders Index is now available as part of the direct indexing offering of Parametric and offered to investors by Summit Trail Advisors.
Gwen Le Berre – Director of Responsible Investing, Parametric:
“We are excited to make this index available on our Custom Core platform and expand the options available to clients that are looking to add a climate change lens.”
Jonathan Lewis – Principal, Head of Sustainable Investing & Chief Portfolio Strategist, Summit Trail Advisors:
“We are proud to collaborate with Morningstar and Parametric to make the US Low Carbon Transition Leaders Index available to our clients. By collaborating with these industry leaders, we are able to offer our clients an important portfolio solution to address their concerns about climate change, its impacts on markets, and their portfolios. This diversifying index strategy enhances our growing tool kit of sustainable investing strategies. It supports our growing capabilities to help clients not only protect against the challenges of climate change but also to identify those companies preparing for the future.”
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