FTSE Climate Risk-Adjusted World Government Bond Index

The FTSE Climate Risk-Adjusted World Government Bond Index (Climate WGBI) is designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds in the FTSE World Government Bond Index (WGBI) incorporating a tilting methodology that adjusts index weights according to each countries’ relative climate risk performance.

The country climate scores are derived by assessing each countries’ relative climate risk across three core climate change pillars (each with multiple sub-indicators):

  • Transition risk represents the impact on the economy from the required efforts to mitigate climate risk as measured by modeled emissions needed to meet 2 degree alignment
  • Physical risk represents the climate related risk to the country and its economy from the physical effects of climate change
  • Resilience risk represents a country’s preparedness and actions to cope with climate risk

Countries are scored across each of the pillars with a single combined score derived for each country. Country scores are then used to reweight the country’s exposure in the index to provide higher exposures to countries that are more resilient to climate change risks and lower exposures to countries that are more exposed to climate change risks.

The Climate WGBI is based on FTSE Russell’s flagship global fixed income index, the FTSE World Government Bond Index (WGBI). The WGBI is a widely used benchmark that currently comprises sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available.