EMISSION-SENSITIVE INVESTING
At the launch of the Bombay Stock Exchange's (BSE) green index on Wednesday, authorities said that there were possibilities that the index could be used to develop green funds, exchange-traded funds and structured products.
The 20-share index includes Tata Steel, State Bank of India, Larsen and Toubro, ICICI Bank, Sterlite Industries, NTPC and many more leading stocks. Stocks from the healthcare category make up 22 per cent of the index followed by finance, which makes up 19 per cent, and power stocks which make up 13 per cent of the index.
This first of its kind eco-friendly index, BSE-GREENEX assesses the “carbon performance” of stocks based on quantitative performance-based criteria. The index aims to encourage socially responsible investing. It consists of the top 20 companies from the BSE-100 Index, which are efficient in terms of emissions.
First, the carbon intensity, the average free float market capitalisation and average turnover of a company is scaled within the sector. Then a composite point for the company is calculated by taking the sum of the points calculated above – multiplied by their weights. The carbon intensity is weighted at 50 per cent, the average free float market capitalisation is at 40 per cent and the average turnover at 10 per cent.
The index will be reviewed biannually in March and September. If a company is excluded from the BSE-100, the same will be excluded from this index as well.
There are plans to launch a family of such indices soon. “The first to be launched will be the water index which is a crucial index. It will take almost a year to launch it. The most difficult to launch will be the waste index,” said a source close to the development. To speed up this process, companies need to declare their efficiencies in all these categories. At present, none of the declarations are mandatory.