New Delhi, Feb. 21--To promote firms working on sustainable business practices, the BSE is expected to launch its second thematic index, the BSE-GREENEX, on Wednesday.
A pick of 20 companies from the BSE 100, the index gives equal weightage to both energy efficiency and profitability — together indicating a long-term sustainable strategy. The Union Corporate Affairs Minister, Mr. Veerappa Moily, is expected to inaugurate the new initiative at Mumbai.
25th index
“Though there are other such indices globally focusing on green credentials, this is the first which is based on actual performance in the energy efficiency front, rather than stated future plans,” a source close to the development told Business Line.
The 25{+t}{+h} dynamic index at the BSE, the BSE-GREENEX, has been co-developed with gTrade, a domestic sustainability firm working on financial innovations in energy efficiency. While BSE provides the financial analytics, the carbon analytics are provided by gTrade.
Right time
The index is targeted at retail, as well as institutional investors such as asset managers and pension funds looking for investments in companies with strong long-term prospects and develop green financial products.
“This is a good time for such an index as there is a global policy emphasis on sustainability as resources are getting expensive and scarce,” the source said.
“Research over the last three years has shown that this index is performing better than the Sensex, indicating that companies that are able to balance energy efficiency and profitability, give better returns for investors,” he added.
The index follows a sector-specific algorithm, whereas a benchmark each company is measured only against the best in the same specific industry based on publically disclosed energy and financial data. Thus, if for example, on measures NTPC against other power generation firms, one can know the relative efficiency levels.
Constructive
Mr. Ashvin Parekh, Ernst & Young's National Leader for Financial Services said such an index is “constructive and welcome” for retail investors as it will help them make better decisions.
“Currently, there are very few instruments for retail investors and the market is run by FIIs and institutions, who have their own analysts. Any scenario that helps retail investors participate more meaningfully is very beneficial,” he said.
