Most companies listed on the S&P 500 are more transparent about their exposure to climate change risk than a decade ago, while investors seem a little more astute when it comes to setting the price of these stocks based on of the changes expected with a warming planet.
For Earth Day, Bank of America’s equity and quantity strategy team, led by Savita Subramanian and Marisa Sullivan, created a list of publications highlighting the “amazing greening” of the S&P 500 SPX.
The broad index enjoys almost 11% profit in the current year and has increased by 49% over the last year.
Most of the emissions linked to the S&P 500 (70%) are generated by industrial, utilities and energy combined, although these inventories represent less than 15% of the total index.
Read: “ESG” funds have more energy stocks than one might think
From here, the “green” dissection of the index becomes more nuanced. These are some of BofA’s discoveries, in a series of graphics.
Companies make voluntary moves, although in many cases they had to push investors, customers and employees to protect and find opportunities in a global shift towards renewable energy, carbon capture technology and less dependence on CL00 oils,
and natural gas NG00,
smarter use of water and more. These actions precede what is seen as the potential for stricter regulation that will force companies to expose their climate change risk and report it in a uniform manner.
Companies with high emissions sell with a discount of more than 15% to companies with low emissions. But saying nothing can be worse than saying something bad: companies that don’t disclose emissions data trade at an even deeper discount, analysts said.
The BofA team tracked multiple majors of S&P 500 stocks related to low emissions, net net targets, and water efficiency.
And analysts found that the technology existed in XSW,
RYT,
which have been accessories in environmental, social and government funds (ESG) and ETFs, are not so “green” thanks to high indirect emissions.
Of the companies that have carbon-neutral targets, financial firms have set the fastest average date, 2022. Then follow the consumer core firms, which have a 2025 target mid-date.
However, financial firms have faced a new scrutiny that, despite promises of emissions for their operations, banks continue to finance traditional energy sectors whose emissions pollute.
Read: Major banks have recently pledged to spend trillions of dollars on climate change, but remain scrutinized for funding for oil plots
I: Banks are much more exposed to climate change than they reveal
Read: Invest in electric vehicle batteries, water technology and cryptographic applications to overcome the green wave, says UBS
Consumer sectors account for half of the total waste generated by S&P 500 companies, while technology ranks second. At the moment, consumer commodities and discretionary sectors are among the highest percentage of companies with waste reduction initiatives, according to BofA’s analysis.
With a broader perspective on stock market indices, Arabesque, a sustainable finance technology company, found that companies in 14 of the world’s largest stock market indices are often lagging behind in efforts to meet the climate change goals set by major governing bodies.
Using data between 2015 and 2019 and its Temperatureä Score technology, the company included the FTSE 100 UKX,
S&P 100 OEX,
DAX DAX,
i Nikkei NIK,
in his research. It was found that just under 25% of the companies listed in the 14 indices are aligned with meeting the 1.5-degree warming target, a key focus of the United Nations COP26 and the climate summit led by Joe Biden this week.