*This article was published on the University of Cambridge’s website
New climate index will support investors to address fossil fuel expansion through asset allocation and stewardship.
University of Cambridge researchers have selected Bloomberg Index Services Limited (BISL), a benchmark administrator regulated by the UK’s Financial Conduct Authority (FCA), to launch the first global corporate bond index to cover fossil fuel producers, utilities, insurance, and financing to support the University of Cambridge’s aim of supporting strategies for investment in companies that are working to reduce real-economy emissions.
The Bloomberg Cambridge University fixed income index will offer investors the ability to invest across investment grade corporate debt globally through financial products referencing the index.
Approximately 90% of new financing for fossil fuel expansion comes from loans and bonds, making debt one of the most impactful levers for investors to contribute to halting climate change. Bond indices play a critical role in auto-allocating new capital to companies in the real economy and this new index will support investors who seek to invest consistent with their individual investment goals in this space.
A key innovation of the Bloomberg Cambridge University fixed income index is Cambridge’s methodology to select bond-issuing companies based on their current corporate behaviour rather than on whether they are classified within a particular industry, such as fossil fuels. This provides for fossil fuel companies no longer undertaking expansion and phasing down in alignment with the Paris Agreement to be included or re-included in the index.
Anthony Odgers, Chief Financial Officer of the University of Cambridge, said:
“This is an enormously impactful project which showcases the high-quality research undertaken at Cambridge. The index is a game-changer for the growing number of asset owners who invest in corporate debt and understand its impact on fossil fuel expansion, particularly the construction of new fossil fuel infrastructure such as coal- and gas-fired power plants which risk locking in fossil fuel usage for decades.”
“Once the index launches, the University of Cambridge expects to invest some of its own money against financial products referencing it. This will enable us to align our fixed income holdings with our institution-wide objectives.”
Dave Gedeon, CEO of BISL, said:
“We are excited to work with the University of Cambridge and support their collaboration with leading asset owners. Bloomberg transition risk analytics provides the support to Cambridge’s innovative methodology to transform this index into a tool for asset owners to address their goals of engaging corporations with the latest academic evidence for impacting change in the real economy.”
Through a close collaboration with Cambridge, leading global asset owners such as the United Nations Joint Staff Pension Fund (UN JSPF), California State Teachers Retirement System (CalSTRS), Universities Superannuation Scheme (USS), and Swiss Federal Pension Fund PUBLICA provided input and technical market expertise that underpins the index. Alongside the University of Cambridge, the index will be used at launch by investments from the United Nations Joint Staff Pension Fund. Pedro Guazo, Representative of the Secretary-General (RSG) for the investment of the UN JSPF assets said
“We are excited to be part of this initiative whereby asset owners have an index that enables them to invest responsibly.”
Lily Tomson, Senior Research Associate at Jesus College, Cambridge said,
“This new index-level engagement approach presents a unique opportunity for bondholder engagement with companies. Investors are provided with clear, objective criteria to engage with companies seeking inclusion in the index.”
The index is expected later this year.
For further media information please contact:
University of Cambridge:
Paul Casciato
Head of Communications
Cambridge Zero
+44 0799 0560 557