Index provider MSCI has expanded its range of climate indices in a bid to aid investors with both the opportunities and risks associated with transitioning to low carbon society.

The new MSCI Climate Change Indices are designed to help investors create more ‘climate resilient’ portfolios, integrating climate risk considerations into their investment process. This will be achieved through a rules based reweighting methodology.

The indices re-weight securities based on MSCI’s Low Carbon transition score, which measures a company’s exposure to low carbon transition risk, carbon emissions and fossil fuel reserves, and its exposure to opportunities including alternative energy and clean-technology. AXA IM recently launched transition bonds in a bid to encourage companies to move away from fossil fuels.

Remy Briand, Head of ESG at MSCI, said in a statement: “The devastating impacts of climate change will be felt beyond the traditional horizons of most sectors and it is critical that the investment industry collaborates to enable the transition to a low carbon economy, before climate change becomes a defining issue for financial stability.

“While there are transition risks associated with taking early action, there is a growing body of evidence to show that earlier action will ultimately mean a less costly adjustment. At MSCI, we continue to develop our climate change solutions using next generation data, analysis and tools to help with the 1.5-degree alignment and as climate research continues to evolve, we will ensure the MSCI Climate Change Indexes reflect the latest developments.”

The MSCI Climate Change Indices aim to increase exposure to those companies providing solutions to address climate change, with twice the exposure to clean technology companies when compared to the underlying benchmark. The Indices also help to reduce exposure to stranded assets with 50 percent lower exposure to thermal coal and four times less exposure to companies with carbon intensive products than the underlying index.