Exchange Announces Three Types of 'KRX Climate Change Index'

[Asia Economy Reporter Song Hwajeong] The Korea Exchange announced on the 14th that it will release the 'KRX Climate Change Index' on the 19th as part of its response to climate change through the capital market.

The KRX Climate Change Index to be announced this time consists of three types: the 'KOSPI 200 Climate Change Index,' the 'KRX 300 Climate Change Index,' and the 'KRX Climate Change Solutions Index.'

The KOSPI 200 Climate Change Index and the KRX 300 Climate Change Index apply low-carbon transition scores to the KOSPI 200 and KRX 300, respectively, expanding the proportion of companies excelling in climate change response compared to their weighting in the original indices. The low-carbon transition score quantifies the risks companies face and their risk management capabilities during the transition to a low-carbon economy.

The KRX Climate Change Solutions Index consists of a total of 40 stocks, including the top 20 stocks by low-carbon transition scores and the top 20 stocks by low-carbon patent scores. The low-carbon patent score quantifies patents related to low-carbon technologies by company and serves as an indicator of technological competitiveness in a low-carbon economy.

The low-carbon transition scores and low-carbon patent scores use MSCI Climate Change Metrics.

According to the Exchange, the KOSPI 200 and KRX 300 Climate Change Indices increase the proportion of low-carbon technology companies compared to the original indices while slightly outperforming them in returns. The KRX Climate Change Solutions Index, which has a high proportion of large growth stocks holding numerous low-carbon related patents, achieved higher returns compared to the KOSPI.

The KOSPI 200 Climate Change Index is expected to provide an investment effect of a portfolio that emits about 27% less carbon emissions while investing in stocks similar to those in the KOSPI 200, as the weighting of sectors with high carbon emissions such as utilities, materials, and industrials is lower than in the original index.

An official from the Exchange said, "We expect that the activation of the Climate Change Index will help expand investments in companies possessing low-carbon technologies, thereby aiding the transition to carbon neutrality and a low-carbon economy," adding, "The Exchange plans to hold online briefings in the future to enhance investors' understanding of the Climate Change Index and to promote the spread of ESG (Environmental, Social, and Governance) and climate change investment culture through the capital market."

This content was produced with the assistance of AI translation services.