06 Nov 2020

The S&P Paris-Aligned Benchmark: an ambitious climate action approach

The S&P Paris-Aligned Benchmark: an ambitious climate action approach

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FOR QUALIFIED INVESTORS ONLY– This document is reserved and must be given in Switzerland exclusively to Qualified Investors as defined by the Swiss Collective Investment Scheme Act of 23 June 2006 (as amended from time to time, CISA).

As the US leaves the Paris Agreement – with the prospect of re-entering as a “day one” priority under a potential Biden presidency – climate change is on everyone’s mind, from environmental activists to government decision-makers and corporate CEOs.

The 2015 Paris Agreement prefers to keep global warming to a maximum of +1.5°C above preindustrial levels, and categorically no higher than +2°C. This goal requires the world’s countries to achieve ‘net zero’ greenhouse gas emissions by 2050.

The European Union has recently endorsed the creation of two kinds of benchmark index to help investors align portfolios with the Paris Agreement. They are the Climate Transition Benchmark (CTB) and Paris-aligned Benchmark (PAB).

Paris-aligned Benchmarks are ambitious, a true signal of intent from an investor. They not only put a portfolio on a decarbonisation pathway, but bring it immediately to where it needs to be in 2030 – putting a given equity allocation well ahead of the climate curve.

Read on for an explanation of the characteristics of the Paris-aligned Benchmarks, with in-depth analysis of one of the most globally significant: the S&P 500 PAB.

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Past performance is no indication of current or future performance. The performance data do not take into account of the commissions and costs incurred on the issue and redemption of units.

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This document is for information purposes only and does not constitute an offer, an invitation to make an offer, a solicitation or recommendation to invest in collective investment schemes. This document is not a prospectus as per article 652a or 1156 of the Swiss Code of Obligations, a listing prospectus according to the listing rules of the SIX Swiss Exchange or any other trading venue as defined by the Swiss Financial Market Infrastructure Act of 19 June 2015 (as amended from time to time, FMIA), a simplified prospectus, a key investor information document or a prospectus as defined in the CISA. An investment in collective investment schemes involves significant risks that are described in each prospectus or offering memorandum. Each potential investor should read the entire prospectus or offering memorandum and should carefully consider the risk warnings and disclosures before making an investment decision.

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Conflicts of interest

This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.