05 Nov 2020

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

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

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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