Practical Applications of EU Paris-Aligned and Climate Transition Benchmarks: A Case Study

Abstract

In EU Paris-Aligned and Climate Transition Benchmarks: A Case Study, from the Summer 2021 issue of The Journal of Impact and ESG Investing, authors Yang Wang, Peter Gunthorp, and David Harris (all of FTSE Russell) address the climate transition benchmarks laid out by the EU’s Commission Delegated Regulation 2020/1818 (the Benchmark Regulation). The authors use a tilt-based target exposure framework to construct portfolios to meet the new benchmarks and demonstrate their performance over a 10-year simulation period. They also use third-party assessments for corporate target-setting requirements and examine how adding those assessments affects portfolio allocations.

TOPICS: ESG investing, information providers/credit ratings, portfolio construction, performance measurement