TASE is Launching a Green Index Version of the TA-125 Index

TEL AVIV, Israel, Nov. 9, 2020 /PRNewswire/ — The Tel-Aviv Stock Exchange (TASE: TASE) announced today the launch of a new index – TA-125 Fossil-Fuel-Free Climate Index. The index will be comprised of shares included in the TA-125 index, excluding those of corporations involved in the production chain of fossil fuels, i.e. corporations engaged in the exploration, production, transport, storage and refining of fossil fuels (gas, coal, petroleum, oil shale and their derivatives). The list of “fossil fuel corporations” will be determined by the “Clean Money Forum” of the “Life and Environment” organization, the umbrella for Israel’s environmental organizations.

The new index is launched on the backdrop of a growing global demand for environmental investments and as part of TASE’s strategy of expanding and diversifying investment options.

Global Growth of Fossil Fuel-Free Investments

One of the main challenges of humanity is handling climate risks and global warming.  In 2018 The Intergovernmental Panel on Climate Change (IPCC) emphasized the importance of containing the processes that contribute to global warming and the critical window of opportunity for stopping global warming by 2030. Those measures are intended to prevent the exacerbation of natural disasters such as flooding, major wildfires, droughts, water and food shortage and more. The World Economic Forum that convenes annually in Davos, determined that the top five risks to the global economy are environmental, including extreme weather conditions, climate action failure and man-made natural disasters. We are also witnessing insurers’ refusal to provide insurance coverage for assets and economic activities for fear of natural disasters (which intensify as global warming progresses), anticipated large waves of refugees and destabilization of multiple countries. “Business as usual” means the escalation of global warming, which the world is now joining efforts and resources to curtail. Thus, for example, the European Union has approved an ambitious detailed plan, “Green New Deal”, which aims to make Europe fully green by 2050. To meet this goal, the European Union has approved a budget of EUR 1 trillion for the coming decade, to be funded in equal parts from the Union’s budget and by the private sector, which will be dedicated to programs for the encouragement of investment in green energy.

A main cause of greenhouse gas emissions and global warming is the widespread use of fossil fuel energy sources, such as petroleum, coal and gas. A long list of countries and leading global financial institutions have acknowledged the severity of the risks and are working to reduce or divert investments from companies that are part of the production chain of fossil fuels. These include 130 banks that manage US$ 47 trillion, such as Barclays, Citigroup and Deutsche Bank, as well as funds and other major investment institutions.

To address the growing demand for fossil fuel-free investments, in recent years international indices companies have launched fossil fuel-free indices that are based on leading global benchmark indices, such as: S&P 500 Fossil-Fuel-Free Index, S&P Global 1200 Fossil-Fuel-Free Index, MSCI World ex Fossil Fuels Index (EUR), MSCI EAFE ex Fossil Fuels Index (USD) and more.

TASE’s Environmental Index

As part of its strategy of expanding investment products, due to the increasing importance of  environmental investments and the growing number of investment institutions that are actively encouraging such investments, the management of TASE has decided to launch a new index that will provide a way for local and international investors that are prohibited from investing in fossil fuel corporations, to invest in the TA-125 index, TASE’s environmental index, sidestepping fossil fuel companies.

To this end, TASE has entered a collaboration agreement with the umbrella organization of Israel’s environmental organization, the “Life and Environment” organization. Pursuant to the agreement, the organization will draft the list of fossil fuel corporations the shares of which are listed on TASE, according to the following guidelines, as set out by the Association:

  • A corporation engaged in the exploration, production, conveying, storage and refining of fossil fuels (gas, coal, petroleum, oil shale and their derivatives).
  • A corporation engaged in the construction and operation of power plants that use fossil fuels to generate electricity.
  • A corporation the main objective of which is financing a fossil fuel entity and/or receiving royalties from a fossil fuel entity.
  • A corporation that is a controlling shareholder (as defined in the Securities Law) in a fossil fuel entity.

The TA-125 Fossil-Fuel-Free Climate Index will be updated once a year, in the semi-annual equity Indices Update in August. The weight cap of a share in the index will be similar to the weight cap in the TA-125, i.e. 5%.

According to the simulation performed on October 15, 2020, the index includes shares of 112 companies with a market cap of about NIS 545 billion. Public float value is about NIS 376 billion.

It should be noted that a simulation of the shares portfolios of the TA-125 Fossil Fuel-Free Climate Index demonstrate that they outperform the yields of the shares portfolios of TA-125 Index for one year, 3 years and 5 years. This is consistent with the surplus yield of the S&P 500 Fossil-Fuel-Free Index over the S&P 500 Index.

The index will be launched on December 6, 2020. The record date for determining the composition of the index will be the end of trading on November 12, 2020.

The new index will be joining another green index launched by TASE yesterday (November 8, 2020), also in keeping with the global rise in environmental investing, TA-Cleantech, which comprises shares of 12 renewable energy companies. The launch of a local cleantech index was made possible now that the cleantech companies listed on TASE have reached the numbers and market cap required for a in depth index that is representative of this growing sector.

Former Knesset Member and Chairperson of “Life and Environment”, Rachel Azaria, said: “We all share the responsibility of preventing the climate crisis for the future of our children, and it is good to see that the business sector acknowledges this responsibility. This move by TASE is groundbreaking in Israel and places it on the front line with other stock exchanges around the world. Israel must make a transition to renewable energy, for the good of the environment, the economy and our future in the State of Israel, and join dozens of countries worldwide that have set a target of 100% renewable energy, for a future that is free of fossil fuels. We are calling investors to come aboard this global journey towards a greener, cleaner and healthier future. We are delighted and grateful for this collaboration with TASE.”

Ittai Ben Zeev, TASE CEO, said that: “The capital market can and should trigger environmental and social change that affects all of our lives as well as the future generations. Today, TASE is joining the world’s leading exchanges, allowing investors and market players to take a moral stand in their investments, by offering a broader and more diversified range of products as part of TASE’s long-term strategy.”

Comparison of Yields on Shares Portfolios

Yield in the past year (15/10/19-20)3-year yield (15/10/17-20)5-year yield (15/10/15-20)
TA-125 shares
TA-125 Fossil-Fuel-Free Climate Index shares portfolio12.15%63.29%211.60%

Comparison of Yields on S&P Indices

Yield in the past year (15/10/19-20)3-year yield (15/10/17-20)5-year yield (15/10/15-20)
S&P 50016.53%36.21%71.35%
S&P 500 Fossil-Fuel-Free Index18.35%39.85%77.83%

About the “Clean Money Forum”

The Clean Money Forum is a coalition of environmental and social organizations that address the financial aspects of handling the climate crisis. The Forum was established in 2020, with the objective of consolidating activities and issuing a joint call to private and institutional investors, to ensure that our money works in our favor and not against us. The Forum operates within the “Life and Environment” Association, the umbrella organization for environmental associations in Israel.

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Orna Goren
Head of Communication and Public Relations Unit
Tel: +972-76-8160405

SOURCE The Tel Aviv Stock Exchange Ltd.

Published on November 9, 2020

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