FTSE Russell Expands Climate-Aligned Bond Indices to Include High-Yield and Emerging Markets

FTSE Russell has expanded its Fixed Income EU Climate Benchmark index series to include high-yield securities and emerging markets, aligning these with the 2015 Paris Climate Agreement. Launched in June 2024, the phase 2 indices introduce a broader array of bonds to cater to the growing demand for climate-aligned fixed income investments. These new indices, including the FTSE World High-Yield PAB Bond Index (WHYM PAB) and FTSE Asian Broad CTB Corporate Bond Index (ABBI CTB Corp), are designed to reflect the sustainable investment (SI) performance of issuers. The indices apply a “target exposure” framework to adjust the weights of bonds based on their carbon footprints and adherence to environmental standards. As a result, traditional heavyweights like energy and banks are significantly underweighted due to their higher carbon emissions and lack of comprehensive carbon data. “Banks are underweighted due to their limited carbon emission scope 3 data, leading to lower scores under our index criteria,” explained the FTSE Russell representative. In contrast, sectors like manufacturing and services are over-weighted, reflecting their greater alignment with green revenue and sustainable practices.

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