The FTSE Climate Collective Transition EMU Broad Government Bond Index

A: The FTSE Climate Collective Transition EMU Government Bond Index offers a sustainable fixed income solution for investors aiming to integrate countries’ transition performance into sovereign debt portfolios. By tilting toward climate leaders and away from laggards, the index supports investors who seek to:

• Manage long term transition risk in sovereign portfolios, based on a comprehensive assessment of their climate policies and actions.
• Increase exposure to climate aligned government bonds.
• Enhance allocations to green bonds.
• Invest in a climate transition government bond benchmark aligned with globally recognised frameworks.

In addition, the index:

• Maintains the investability of the parent benchmark by preserving liquidity, credit quality, and duration characteristics.
• Is designed to be suitable for both passive and active investment strategies.

A: The Climate Collective Transition Assessment Methodology uses fifty-five indicators, both quantitative and qualitative from the latest yearly available data to evaluate each sovereign issuer across three pillars—Evidence, Ambition, and Policy—to determine their alignment with Paris Agreement objectives. This approach draws on comprehensive ASCOR (Assessing Sovereign Climate-related Opportunities and Risks) assessment data to ensure consistency and comparability across EMU sovereigns.

The “three pillars”

• Evidence
  Assesses countries’ current and historical climate performance, using outcome-based indicators such as emissions levels and energy intensity. These metrics reflect structural characteristics that governments cannot change immediately but can influence over time through effective climate policies-based indicators such as emissions levels and energy intensity.
• Ambition
  Evaluates future targets or commitments, including emissions reduction targets and climate finance contributions. This incorporates both outcome and input measures that demonstrate a country’s forward looking climate transition approach.
• Policy
  Examines implemented climate policies, including renewable energy strategies, green jobs programmes, and broader sustainable development policies. These are input based measures that can be directly influenced by government action and drive real economy outcomes.

For more information on “ASCOR”, please refer to Question 3.

The Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) framework forms the basis of the Climate Collective Transition Assessment Methodology. Based on publicly available data, it provides investors with a consistent, transparent way to evaluate how countries are managing climate risks and preparing for the transition to a low carbon economy.

Main highlights:

• Comprehensive climate performance dataset
  Developed to assess countries’ climate performance across mitigation and adaptation dimensions, using both quantitative and qualitative indicators.
• Created through a global investor collaboration
  Developed by The TPI Global Climate Transition Centre (TPI Centre) at LSE in partnership with a group of asset owners, asset managers, and investor networks.
• Widely recognised industry reference
  Used in the Institutional Investors Group on Climate Change (IIGCC) Net Zero Investment Framework 2.0 as a recommended source for assessing sovereign climate alignment and transition plans.
• Supports investor understanding of sovereign climate risk
  Provides a common reference point for analysing sovereign exposure to climate related risks and assessing government transition plans
• Robust and wide-ranging metrics
  Includes indicators covering emission pathways, net zero targets, climate finance, carbon pricing, adaptation planning, and more.
• Unique coverage of forward looking and fairness-based measures
  Incorporates elements such as “fair share” decarbonisation pathways and whether a country has enacted national climate laws or adaptation plans.