Longspur Research and Radnor Capital Partners have launched the Active Net Zero Clean Energy index to allow investors to measure the performance of companies actively enabling climate solutions.
The ‘Active Net Zero’ methodology has been pioneered by Longspur and Radnor to evaluate companies based on their actual performance towards the energy transition in a systematic, transparent and repeatable framework.
This pan-European index eliminates greenwashing by penalising fossil fuel activities and focuses on actual achievement and positive contribution, “rather than promises for the future”.
The Active Net Zero Clean Energy index represents the top 50 European clean energy and related companies that meet these stringent criteria, and is then adjusted for market capitalisation and liquidity.
Adam Forsyth, head of research at Longspur Capital, said: “We were looking to create a universe and index that was not just reliant on negative screening, and ‘clean’ or ‘green’ labels. We wanted to create a systematic methodology that reflects a company’s active engagement and progress in pursuing a net zero outcome.”
The company said there is a need for a “deeper, more stringent, methodological review of the inclusion criteria for the clean energy sector to avoid so-called ‘greenwashing’ which results in net zero ‘laggards’ – companies that may have made net zero promises, but have yet to deliver material ‘green’ revenues or capex commitments – being included in mainstream, ostensibly ‘clean’ energy indices”.
“Many companies are complying or moving towards compliance with clean emission targets. This is certainly positive, but we know investors are looking for more. We are targeting the enablers who are delivering clean energy solutions for everyone, not just themselves,” it added.
Eligibility criteria for inclusion in the Active Net Zero Clean Energy index are externally defined using the EU Taxonomy for Sustainable Activities and selecting activities which are on the pathways set out by the IPCC in its Special Report on Global Warming of 1.5°C and more recently in the IEA’s Roadmap to Net Zero report.
Iain Daly, director and co-founder at Radnor Capital Partners, added: “This index has been designed with authenticity at its heart. Investors are eager and willing to invest in the companies building a more sustainable future, but the means to do this are not immediately clear.
“This index identifies those companies helping the world reach net zero, rewarding genuine contribution, not vague or unrealistic promises.”
Originally published at Investment week