FTSE Climate Risk-Adjusted Government Bond Index Series

The FTSE Climate Risk-Adjusted Government Bond Index Series is designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds in the FTSE World Government Bond Index (WGBI) or FTSE EMU Government Bond Index (EGBI) 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 level of climate related risk exposure of the country’s economy as measured by the distance to reach the modeled emissions needed to meet a 2 degree alignment
  • Physical risk represents the level of climate related risk exposure 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 its level of climate related risk exposure

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.