S&P launches clean energy daily risk control indices
Standard & Poor’s has launched the S&P Global Clean Energy Daily Risk Control Indices.
The launch of the new indices is the latest in a series of S&P risk control indices to enable investors to target and control the level of risk in an underlying S&P equity index.
It follows the S&P Global Clean Energy Index, the S&P Global Eco Index, the S&P US Carbon Efficient Index and the S&P/IFCI Carbon Efficient Index (for emerging markets).
The S&P Global Clean Energy Daily Risk Control Indices integrate a volatility control within the index rules and are designed to offer investors a way to gain exposure to clean energy investments while controlling the level of risk.
The four new indices provide exposure to the S&P Global Clean Energy Index, with specific controls around the volatility level (at five per cent, ten per cent, 12 per cent and 15 per cent respectively).
Steve Goldin, vice president, S&P Indices, says: “Clean energy and carbon efficient investments have been priority themes for S&P Indices over a number of years. With the launch of these new indices, we are helping to meet demand from ETF and structured products providers for indices that not only invest in clean energy but also address their requirements for risk control by including a risk management overlay to control the level of volatility of the index.”
The indices aim to offer investors greater stability and control of the overall risk level of the S&P Global Clean Energy Index, an index providing liquid and tradable exposure to a diversified mix of 30 clean energy companies from around the globe.
S&P Indices’ risk control methodology can be applied to any S&P index in order to control its level of risk by establishing a specific volatility target and managing the risk relative to that target. If the risk level reaches a threshold that is too high, the cash level is increased in order to maintain the target volatility. If the risk level is too low, the index will employ leverage to maintain the targeted level of volatility.
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