by Qontigo
Asset owners
Consulting firms
The need
BlackRock was looking to offer ETF clients interested in investing in German equities a sustainable alternative to its standard ETF which was Willis Towers Watson (WTW), a global consulting firm, was looking for a partner to help them develop indices that would incorporate their proprietary climate data and provide investors with a sophisticated way of managing climate transition risk.
The challenge
The new indices required the integration of WTW’s Climate Transition Value at Risk (CTVaR) data. This is a proprietary measure that analyzes the impact on projected company cashflows of transitioning from a ‘business as usual’ scenario – reflecting current policies – to an environment where emissions pathways are consistent with the goals of the Paris agreement.
The solution
Our open data architecture approach combined with our index construction expertise enabled us to collaborate with our client to develop the STOXX® Willis Towers Watson Climate indices. Starting from broad STOXX universes, securities are evaluated in terms of predefined sustainability characteristics. Companies identified as non-compliant based on Sustainalytics’ Global Standard Screening assessment or companies that are involved in controversial weapons, thermal coal and oil sands are removed from the universe. The remaining eligible companies are weighted according to their free-float market capitalization adjusted by the Climate Transition Value at Risk (CTVaR) metric calculated by WTW. In general, the indices tilt away from companies with high exposure to climate transition risk.
