The FTSE Climate Risk-Adjusted Carry and Roll Down Government Bond Index Series seeks to reflect a targeted exposure to the sovereign bonds in the FTSE Climate Risk-Adjusted Government Bond Index (the “base universe”). The index series aims to support global fixed income investors to incorporate climate risk considerations while providing flexibility on optimising factor variants.
The weightings for each security within the Index are determined by an optimisation process that aims to maximise the rolling yield return, i.e., Carry (yield) and Roll Down (returns from shortening of bond maturity and positive yield curve roll down) of the Index, subject to duration and country weight constraints of the Base Universe.
The base universe measures the performance of fixed-rate, local currency, investment-grade sovereign bonds based on the market capitalisation of its index eligible debt in the FTSE World Government Bond Index or FTSE EMU Government Bond Index, as well as by incorporating a tilting methodology that adjusts index weights according to each country’s relative climate risk performance, measured across three distinct and quantitative, climate-related pillars: transition risk, physical risk and resilience.
There are a range of government bond indices available, which allows for flexibility towards desired climate exposure. The ‘advanced’ versions of the indices are constructed with a stronger tilt to the Transition pillar, therefore offer greater exposure to countries with a stronger alignment to the 2 degree pathways.
The series comprises:
FTSE Climate Risk-Adjusted Carry and Roll Down World Government Bond Index (FTSE Climate CaRD WGBI)
FTSE Advanced Climate Risk-Adjusted Carry and Roll Down World Government Bond Index (FTSE Advanced Climate CaRD WGBI)
FTSE Climate Risk-Adjusted Carry and Roll Down EMU Government Bond Index (FTSE Climate CaRD EGBI)
FTSE Advanced Climate Risk-Adjusted Carry and Roll Down EMU Government Bond Index (FTSE Advanced Climate CaRD EGBI)
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