How To Build A Climate-Adjusted Government Bond Index

Douglas Bourne, Lee Clements, Guillaume Emin & Thomas Lorans

Research Organisation
FTSE Russell

Report Date
Sept. 2, 2020

Document summary

Climate change is a substantial challenge, which is expected to have a significant impact on global economies, both in terms of its physical effects and mitigating efforts. To date, investors have focused mostly on climate risk at the corporate or asset level (particularly listed equities), consequently, government bond investors risk overlooking the impact of climate change on their portfolios.

There are multiple, distinct design and methodological challenges associated with incorporating climate risks, including physical, transition and resilience risks, into government bond indexes. In this ground-breaking report the authors introduce the Advanced Climate Index Series which has been designed for index-users with a focus on improving the climate performance of their government bonds investments.