SAN FRANCISCO, Oct. 19, 2015 /PRNewswire/ -- The Etho Climate Leadership Index (ECLI), a diversified, low-cost index completely divested from fossil fuels and focused on climate efficiency in other industries, was launched today as the first tool of its kind. The fossil free index combines quantitative climate efficiency data with best-in-class sustainability screening, and was developed by Etho Capital, a new investment management company committed to taking sustainable investing mainstream. Etho Capital will launch an exchange-traded fund (ETF) based on U.S. equities in the ECLI later in 2015.
To be included in the ECLI, Etho Capital verified that companies met standards of fossil free and socially responsible investing. The ECLI combines quantitative data, socially responsible investing expertise and broad sector diversification while using strategies that select the best equities for the future of the planet and portfolios.
"Companies with efficient supply chains and management teams that plan for the long run are likely to do better in our changing climate," said Conor Platt, Co-Founder, Chief Executive Officer and Chief Investment Officer of Etho Capital. "Environmental, social and governance impact investing is one of the fastest-growing segments in asset management today, with leadership at many top wealth management firms proactively seeking out these investment strategies. At Etho Capital, we operate in a world where financial returns are synonymous with a thriving environment."
To build the ECLI, Etho Capital used a positive selection methodology to review more than 5,000 of the most commonly traded public companies and identify the most carbon-efficient climate leaders in each industry. Using climate performance data from Trucost, Etho Capital ranked almost all public companies around the world by carbon emissions per dollar invested to select the ECLI's holdings. All fossil fuel, tobacco, weapons and gambling companies were eliminated from the index. Finally, a company screen was conducted based on environmental, social and governance performance data with expertise from NGO partners and input from global stakeholders.
"Our new index and back tests show that investing in diversified climate efficiency has yielded higher returns for the past decade. Climate leaders generally outperform climate laggards in most industries, and we think this trend will accelerate in a carbon-constrained future. Using our new data tool to visualize how the climate leadership index was constructed, we're empowering investors to optimize for returns and sustainability at the same time," said Ian Monroe, Co-Founder, President and Chief Sustainability Officer of Etho Capital, as well as a Lecturer on climate change and life cycle assessment science at Stanford University.
Prior to its launch, the ECLI was closely studied to understand how it would have performed historically compared to major relevant indices. In 10-year back tests conducted by Etho Capital, the ECLI outperformed the S&P 500 Index on a risk-adjusted basis while reducing greenhouse gas pollution per dollar invested by 50 to 80 percent.
The new ECLI and ETF that is in development are the first of a series of products that Etho Capital will launch in efforts to build the world's best fossil fuel-free investment solutions with superior environmental, social and financial returns.
"The movement to divest from fossil fuels and invest in the clean energy economy is becoming increasingly accessible for all investors, not just endowed institutions and high net worth individuals," said Vanessa Green, Campaign Director of Divest-Invest Individual. "Thanks to growing grassroots activity in the Divest-Invest movement and tools like the Etho Climate Leadership Index, retail investors can put their money behind high-bar companies and opportunities that usher in a regenerative future while climate laggards like oil, coal and gas companies are on the decline."
For more information on the ECLI and to access an interactive data visualization on how the index was constructed, please visit www.ethocapital.com/index-construction.
About Etho Capital
Etho Capital is a mission-driven investment management company committed to helping solve climate change by bringing sustainable investing mainstream. Etho's mission is to build the world's best fossil free investment solutions by providing superior environmental, social, and financial performance. Etho's innovative and thoughtful approach combines quantitative sustainability science and stakeholder expertise with the diversified returns and risk management of index investing.
SOURCE Etho Capital