Nedbank Capital has launched South Africa’s first Green Index, which serves as a benchmark for environmentally conscious investors. The index has the potential to become the industry standard in measuring the performance of companies with environmentally sustainable business practices.
The Nedbank Green Index is a strategic fit with the group’s desire to be a leader in the sustainability space and a key contributor to the green economy, and it will allow clients who share Nedbank’s aspirations in the green space to demonstrate this in their investment.
“We are proud to be able to launch South Africa’s first Green Index, which demonstrates our commitment as a bank to deliver innovative products in the green space,” says Nedbank Capital senior transactor Jacoleen Simpson.
She adds that work on the index has shown that taking the environ- ment into account in investing can also make sense from a finan- cial perspective and investing responsibly does not have to come at a cost to performance for the investor.
The index is rules based with a clear, transparent methodology based on objective and independent data, and will be verified by an independent calculation agent on an ongoing basis, with daily values published on data service providers such as I-net, Bloom-berg and Reuters.
To ensure objectivity, the Green Index is built on the Carbon Disclosure Project (CDP) database and the UN register of Clean Development Mechanism (CDM) projects in South Africa.
The CDP is an independent not-for-profit organisation, based in the UK, which holds the largest database of corporate climate change commitment and action in the world. The CDP has 551 institutional investors as signatories, representing over $71-trillion in assets under management.
CDM projects based in South Africa are also incorporated into the rules-based methodology as these represent demonstrable commitments from companies to reducing their carbon impact and growing the green economy. The index combines these environmental credentials, with liquidity screening criteria, to create an investable index.
Unlike other currently available South African indices, it uses environmental and liquidity criteria to select con- stituents and weights these constituents according to environ- mental performance. This distinguishes it from the JSE’s Socially Responsible Investment Index, which selects constituents based on environmental, social and governance criteria and, there- after, weights constituents based on their market capitalisation.
Nedbank is also in the process of gaining the necessary approvals to list an exchange-traded fund (ETF) over the Nedbank Green Index, which will provide easy, low-cost access for retail and institutional investors. The ETF will be the second to be launched in the BettaBeta ETF series.