Scientific Beta

The 2019 update of the Benchmark Regulation has entrusted the European Commission to detail index construction standards for the EU Climate Benchmarks and sustainability disclosures for all benchmarks. The Commission created extensive and expensive disclosures. This is a boon for data providers but not a major advance for decision making around sustainability as these only apply to benchmarks pursuing ESG objectives and their relevance is further limited by insufficient standardisation. The Commission's choice of objectives, metrics, parameters and constraints for the EU Climate Benchmarks incentivises reduction of portfolio exposure to high carbon intensity sectors over the promotion and reward of decarbonisation in the real economy consistent with the Paris Agreement.

The 2019 update of the Benchmark Regulation has entrusted the European Commission to detail index construction standards for the EU Climate Benchmarks and sustainability disclosures for all benchmarks.

The Commission created extensive and expensive disclosures. This is a boon for data providers but not a major advance for decision making around sustainability as these only apply to benchmarks pursuing ESG objectives and their relevance is further limited by insufficient standardisation.

The Commission's choice of objectives, metrics, parameters and constraints for the EU Climate Benchmarks incentivises reduction of portfolio exposure to high carbon intensity sectors over the promotion and reward of decarbonisation in the real economy consistent with the Paris Agreement.

Investors should support standardisation of disclosures and insist on the need for issuer-level disclosures and their accessibility through open data platforms. Impact-concerned investors need to perform due diligence on EU Climate Benchmark methodologies and data to avoid associating with greenwashing and to identify features contributing to alignment with the Paris Agreement.