Hedge Fund Focus

The hedge fund law blog recently wrote an article about carbon hedge funds.  There are a number of different strategies which these funds can use within the carbon space.  One more product which was just recently launched is a carbon index.  The S&P just recently announced the creation of this index (first release below) and then announced one company, Tyco, would no longer be part of the index (second release below).

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S&P Launches U.S. Carbon Efficient Index

New Index Focuses on U.S. Companies with Low Carbon Footprints

New York, March 9, 2009 – Standard & Poor’s, the world’s leading index provider, today announced the launch of the first in a series of global low carbon indices to meet the growing investor demands for environmentally focused indices. The S&P U.S. Carbon Efficient Index will measure the performance of large cap U.S. companies with relatively low carbon emissions, while seeking to closely track the return of the S&P 500.

The new Index, which is part of the Standard & Poor’s global thematic index series, provides a benchmark to the market, as represented by the S&P 500, while allowing investors to create financial products that seek to gain exposure from a more environmentally efficient perspective.

“Organizations around the world are paying greater attention to the impact of greenhouse gases on our climate, as increasingly more investors consider carbon efficiency as an important investment theme,” said David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s Index Services.
“Standard & Poor’s is the first independent index provider to offer a broad U.S. market index with an environmental focus, reinforcing our position as the premier provider of global thematic focused indices.” With the addition of the S&P US Carbon Efficient Index to the global thematic family, the series will now cover such green themes as Water, Forestry, Eco and Carbon efficiency.

To reflect its carbon efficiency, the Index is comprised of constituents of the S&P 500 that have a relatively low Carbon Footprint, as calculated by Trucost Plc. Trucost, the environmental data organization quantifies the environmental impact of over 4,500 companies across different sectors and geographies. Trucost calculates the carbon intensity of companies in the S&P U.S. Carbon Efficient Index by researching and standardizing publicly disclosed information and engaging directly with companies to verify its calculations on an annual basis.

Carbon Footprint is calculated as the company’s annual greenhouse gas emissions assessment (expressed as tons of carbon dioxide equivalent) divided by annual revenue.

“With the world’s most comprehensive database of corporate carbon emissions, Trucost is uniquely able to provide Standard & Poor’s with information to significantly reduce the carbon exposure of its Index,” said Simon Thomas, Chief Executive of Trucost Plc.

The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their Carbon Footprint. The 100 equities with the highest Carbon Footprints, whose aggregate exclusion does not reduce any individual GICSi sector weight of the S&P 500 by more than 50%, are removed. Historically, the choice to maintain at least 50% of each GICS sector weight provided the greatest reduction in carbon footprint while closely tracking the return of the S&P 500. Standard & Poor’s also excludes companies, if any, which have not yet been assigned a Carbon Footprint by Trucost.

Through 2008, the average annual Carbon Footprint of the S&P U.S. Carbon Efficient Index was 48% lower than that of the S&P 500.

About Standard & Poor’s
Standard & Poor’s, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With approximately 10,000 employees, including wholly owned affiliates, located in 23 countries and markets, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com.

About Trucost
Trucost Plc is a world-leading environmental data organisation which helps companies and investors understand the environmental impacts of business activities. Trucost provides data and analysis on company emissions and natural resource usage in financial as well as quantity terms to help investors, fund managers and analysts understand how environmental issues could affect companies’ future earnings.
Institutional investors use the information to assess the carbon or environmental footprints of their portfolios, to identify differences in performance, address environmental risks and create structured products with lower carbon or environmental impacts. Trucost tracks data on the environmental impacts and disclosures of over 4,500 companies and has the world’s largest record of greenhouse gas emissions.

For more information contact:
David R. Guarino
Communications
Standard & Poor’s - NY
(+1) 212 438 1471
dave_guarino@standardandpoors.com

Mark Tierney
Communications
Standard & Poor’s – UK
+ 44 207 176 3504
mark_tierney@standardandpoors.com

[i] The Global Industry Classification Standard is an enhanced industry classification system. GICS was developed in response to the global financial community’s need for one complete, consistent set of global sector and industry definitions

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Standard & Poor’s Announces Changes to the S&P U.S. Carbon Efficient Index

New York, NY, March 11, 2009 – Standard & Poor’s will make the following changes in the S&P U.S. Carbon Efficient Index:

Tyco International Ltd. (USA, SEDOL: B1YW9H8, GICS Code: 20105010) will be deleted from the S&P U.S. Carbon Efficient Index after the close of trading on March 16, 2009. Tyco is in the process of redomesticating to Switzerland, and will be dropped from the S&P 500 and the U.S. Carbon Efficient Index as of that date.

About Standard & Poor’s Index Services
Standard & Poor’s Index Services, the world’s leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Its family of indices includes the S&P 500, an index with $1.5 trillion invested and $4.85 trillion benchmarked, and the S&P Global 1200, a composite index comprised of seven regional and country headline indices. For more information, please visit www.standardandpoors.com/indices.

About Standard & Poor’s
Standard & Poor’s, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With approximately 10,000 employees, including wholly owned affiliates, located in 23 countries and markets, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com.

For more information contact:

David Blitzer
Chairman of the Index Committee
(212) 438-3907
david_blitzer@sandp.com

Dave Guarino
Communications
1 212 438 1471
dave_guarino@sandp.com