GEF joins launch of S&P-IFC Carbon Efficient Index for emerging markets

The world’s largest public environment fund, the Global Environment Facility (GEF) is joining with the IFC, a member of the World Bank Group, and Standard & Poor’s to launch the world’s first carbon efficient index for emerging markets. The partners predict their efforts could mobilize more than $1 billion for carbon-efficient companies over the next three years.

The innovative S&P/IFC Carbon Efficient Index will encourage carbon-based competition among emerging-market companies, give carbon-efficient companies access to long-term investors, and should lead to important reductions in carbon emissions in developing countries.

"This is the kind of innovative project the GEF supports as part of our drive to expand collaborations with private sector partners." Monique Barbut, CEO of the GEF said " Our work with IFC builds on this commitment and we look forward to working with investors who have the vision to meet the climate change challenge. By directing institutional capital towards more carbon efficient companies this product helps brings private sector and institutional investors closer to our mission of investing locally for global impact."

Rachel Kyte, IFC Vice President for Business Advisory Services, added, “With growing pressure on investors to diversify and maintain returns by increasing exposure to emerging markets, and with more and more investors keen to demonstrate a preference for sustainability, including carbon efficient companies, IFC hopes that the launch of this index will help ensure that carbon efficiency is rewarded in the market and that best-in-class companies gain better access to capital.”

The index was developed by S&P using carbon data provided by Trucost. It will allow investors to closely track the performance of the S&P/IFC Investable Emerging Markets Index, a leading emerging-market benchmark. Investors will gain exposure to emerging markets and benefit from market rates-of-return while reducing the carbon footprint of their portfolios by 24 percent.

The Global Environment Facility, through its private sector program, the GEF Earth Fund, provided financial support to the IFC/ S&P Trucost consortium to accelerate the carbon research on emerging market companies. GEF also provided support to the Carbon Disclosure project to increase their outreach to emerging market companies listed on the index.

The initiative is the result of a pioneering collaboration that draws upon S&P’s experience in index construction, Trucost’s expertise in analyzing and estimating carbon emissions, and the Carbon Disclosure Project’s leading engagement initiative to encourage public disclosure of carbon emissions.

IFC provided financial support to the S&P/Trucost consortium to accelerate the carbon research on emerging-market companies. It also provided technical support to help validate and refine the methodology, and it is supporting the Carbon Disclosure Project’s efforts to increase their emerging-market coverage by over 500 companies. The initiative also was supported by the United Kingdom’s Department for International Development .

IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. IFC has worked with GEF to establish the GEF Earth Fund, a window for GEF to engage with private sector and support innovative projects that promote global environmental objectives.