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KRX, S&P DJI develop carbon efficiency green new deal index

Factory smokestacks emit fumes (Yonhap)
Factory smokestacks emit fumes (Yonhap)
South Korea’s sole bourse operator Korea Exchange and S&P Dow Jones Indices are set to launch a new index Monday that gauges the contributions of companies in reducing carbon emissions in line with the Moon Jae-in administration’s “Green New Deal” initiative, one of the key pillars of its economic stimulus package, the officials said Sunday.

The KRX/S&P Carbon Efficiency Green New Deal Index aims to persuade local companies to put greater effort into cutting carbon emissions. If firms achieve lower carbon emissions, a greater proportion of their stocks will be included in the index, according to the KRX.

The index consists of 483 listed firms with carbon emission quantity records -- 260 from the main bourse Kospi and 223 from the tech-heavy Kosdaq -- such as Samsung Electronics, Kia Motors, Nongshim, Celltrion and Naver.

The bourse operator will also utilize the carbon index for exchange-traded funds and index funds to encourage fund operators to speed up efforts to lower their carbon emissions and to attract more investment, the KRX added.

“Our ultimate goal is to contribute to the government’s carbon neutrality plan,” a KRX official said. “With the recent trend of active investment in environmental, social and governance, we expect the index to be an attractive investment vehicle for institutional investors.”

The planned launch of the carbon index comes after President Moon’s announcement last month to make the nation carbon neutral by 2050. Earlier this month, he reaffirmed that the country is seriously committed to the carbon reduction goal and supports the global battle against the climate change. Political parties have also recently filed bills to accelerate the growth of a zero-carbon society.

Market watchers forecast that stocks in relevant sectors will also benefit from those zero-carbon drives.

“Going carbon neutral is a global trend to battle climate change. To achieve such goal, a massive amount of investment in renewable energy and cross-border discussions on carbon trading and carbon taxes are necessary,” said Lee Na-ye, an analyst at Korea Investment & Securities.

“How to react to the government’s environmental initiative will likely determine firms’ future competitiveness. Therefore, investors need to pay close attention to companies with high chances of becoming beneficiaries thanks to the for-environment polices.”

By Jie Ye-eun (yeeun@heraldcorp.com)
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