The MSCI Low Carbon Indexes are intended to help identify potential risks associated with the transition to a low carbon economy while representing the performance of the broad equity market - the first benchmarks designed to address two dimensions of carbon exposure: carbon emissions and fossil fuel reserves.
The MSCI Global Low Carbon Target Indexes aim to reflect a lower carbon exposure than that of the broad market by overweighting companies with low carbon emissions (relative to sales) and those with low potential carbon emissions (per dollar of market capitalization). The indexes are designed to achieve 0.3% (30 basis points) ex ante tracking error target while minimizing the carbon exposure relative to their parent indexes.
The MSCI Global Low Carbon Leader Indexes aim to achieve at least 50% reduction in the carbon footprint by excluding companies with the highest carbon emissions intensity and the largest owners of carbon reserves (per dollar of market capitalization). They also aim to minimize the tracking error relative to their parent indexes.