Jointly launched by Bank of China (Hong Kong) (BOCHK) and S&P Dow Jones Indices (S&P DJI), this is the first climate transition index covering listed companies in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
The index measures the performance of equity securities from the S&P China-Hong Kong Greater Bay Area Index and is weighted to be collectively compatible with a 1.5ºC global warming climate scenario.
It also considers a variety of decarbonisation targets such as the required total greenhouse gas emission reductions as compared with the parent index and a 7% annual decarbonisation, according to S&P DJI.
The index aims to reorient more capital flows towards companies with improved carbon performance and is designed to meet the minimum standards for EU Climate Transition Benchmarks Regulation.
To minimise the difference in constituent weights and maintain a broad-based market exposure, the index incorporates a weighing strategy.
It is rebalanced quarterly and excludes companies that involve in controversial weapons, tobacco and other ESG controversies as monitored by S&P Global’s Media and Stakeholder Analysis.
“Through our collaboration with S&P DJI, we aim to further expand [the] capital market’s role in advancing the region’s low-carbon transition, supporting the national dual-carbon goals and Hong Kong’s Climate Action Plan 2050, while also promoting the development of Hong Kong as a leading sustainable finance hub and building a greener and more sustainable future for the GBA,” said Sun Yu, vice chairman and chief executive of BOCHK.
The Climate Action Plan 2050 was outlined by the Hong Kong government in October last year, aiming to reduce the city’s total carbon emission by 26% to 36%.
There are several strategies stated in the plan, including: ceasing using coal for daily electricity generation; increasing the share of renewable energy; reducing the electricity consumption of commercial buildings; achieving zero vehicular emissions and zero carbon emissions in the transport sector before 2050; and reducing resilience on landfills for municipal waste disposal.