While global utilities are often perceived as some of the worst offenders when it comes to climate transition management and meeting future net zero carbon emissions commitments, three global utility companies are actually taking a leadership role in their sector, according to the recently introduced Morningstar Developed Markets Low Carbon Transition Leaders Index.
The Morningstar Developed Markets Low Carbon Transition Leaders Index provides investors with diversified, broad market exposure to companies leading their sector peers in their readiness for - and action towards - climate transition. Eligible companies are grouped by sector and weighted according to their composite Low Carbon Transition Score, which is based on a combination of a company’s current carbon intensity and its Management Score as determined by Morningstar Sustainalytics Low Carbon Transition Ratings. The index has returned nearly 10% year-to-date as of March 25.
While Utilities currently represent just 2.5% of the Morningstar Developed Markets Low Carbon Transition Leaders Index, the index has identified a handful of global utility players that are leading their peers in terms of demonstrated commitment to the low carbon transition.
Spain-based global energy company Iberdrola SA (OTCMKTS: IBDRY); Italian multinational manufacturer and distributor of electricity and gas Enel Group (OTCMKTS: ENLAY); and US-based public utility Alliant Energy (NASDAQ: LNT) all demonstrate leading edge company management on climate-related issues, earning a relatively high Management Score. Following its methodology, the Low Carbon Transition Leaders Index has significantly overweighted these three companies relative to its parent index.
Rob Edwards: Global Director of ESG Product Management, Morningstar Indexes
“Our Low Carbon Transition Leaders Indexes help identify companies with management that understand how to evolve their business in the context of climate change to protect and grow their market share and innovation. Identifying climate leaders in the global utilities sectors helps illustrate the fact that one can find carbon transition leaders across all market sectors.”
Anya Solevieva: Director, Global Commercial Strategy, Climate Solutions, Morningstar Sustainalytics
“The three low carbon transition leaders within the utility space identified by our new index are taking significant actions to pursue decarbonization targets. These actions include greenhouse gas emissions reporting and tracking, climate risk testing backed by company boards and linking senior decision makers’ pay with stated climate targets. And they are demonstrating their commitment. For example, since 2018 Alliant has issued over €2 billion in green bonds exclusively for solar and wind projects, Iberdola has issued nearly €16 billion in sustainable credit lines and commercial paper and Enel has issued about €3.5 billion in green bonds for broader transition investments in renewable energy.”
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