Sustainability Themes — ISS & STOXX Glossary
About This Section
This glossary covers climate metrics, carbon intensity, Net Zero pathways, transition risk, physical risk, biodiversity, water stress, and other sustainability themes. Terms are sourced from STOXX and ISS Governance official documentation.
~55 terms across multiple sources.
A
Avoided Emissions
▰ 2
Emissions reductions that occur outside a product’s life cycle or value chain, but as a result of the use of that product. Often claimed by providers of renewable energy, energy-efficient technologies, or carbon capture solutions.
Note
avoided emissions are the greenhouse gases that would have been released if a cleaner product or technology had not been used. For example, a wind turbine manufacturer can claim avoided emissions equal to the fossil-fuel generation its turbines displace.
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Carbon Yield methodology here or visit the official website http://carbonyield.org/. 1 The Carbon Yield enables investors to determine the potential avoided emissions of Green Bonds. 2 Bloomberg, as of August 2018
— Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield O…
by the Network for Greening the Financial System (NGFS). - Alternative asset classes: e.g. private loans, real estate, and infrastructure - Potential Avoided Emissions: e.g. companies, infrastructure, and green bonds - Environmental Impact: e.g.
B
Biodiversity Impact Assessment
▰▰▰▰ 62
A systematic evaluation of how a company’s operations, supply chain, or financed activities affect ecosystems, species diversity, and natural habitats. ISS ESG scores companies on their exposure to biodiversity loss drivers such as land-use change, pollution, and invasive species.
Note
this assessment measures whether a company is helping or hurting the variety of life on Earth — from forests and coral reefs to soil organisms. Investors use it to gauge nature-related financial risk.
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This includes one-third of all marine mammals, 40% of all amphibian species, and nearly 33% of coral reefs. SOURCE: OECD 2022 BENEFITS OF USING THE BIODIVERSITY IMPACT ASSESSMENT TOOL The Biodiversity Impact Assessment Tool can be used to support compliance with climate-related disclosure frameworks within the European Union,
— Biodiversity Impact Assessment Tool | ISS
Mean Species Abundance (MSA): The Mean Species Abundance based on ISS ESG Biodiversity Impact Assessment Tool (BIAT) is a metric used to quantify the impact of corporates on biodiversity.
— Istoxx Index Guide (PDF), p. 622
omponent of the ISS STOXX Biodiversity framework is the Potentially Disappeared Fraction of Species (PDF), an output of ISS Sustainability Solutions’ Biodiversity Impact Assessment Tool. PDF seeks to measure how corporates affect our natural world by considering a set of environmental pressures on species and habitats across the
— Monthly Index News February 2026 (PDF), p. 15
This wasn’t always easy to measure and report on, but, again, with new datasets such as ISS STOXX’s Biodiversity Impact Assessment Tool (BIAT)[3], the task is becoming more transparent.” Staying on the topic of biodiversity, DWS and STOXX have collaborated on the Biodiversity Foc
— Q&A with DWS’s Frederike Bauer: ‘Data evolution is fostering awareness in…
The series leverages data from various solutions, including the ESG Corporate Rating, Biodiversity Impact Assessment Tool, Modern Slavery Solution, and Norm-Based Research. This second publication focuses on nickel and cobalt mining.
— Critical Mineral Series: Sustainability Considerations for Investors in Cobal…
Biodiversity Loss
▰▰▰ 50
Quote
“Nature is not a nice-to-have. Biodiversity loss is an existential risk to economies that depend on pollination, clean water, and stable soils.”
— Partha Dasgupta, The Economics of Biodiversity: The Dasgupta Review (2021)
The decline in the variety and abundance of species and ecosystems at the genetic, species, and ecosystem levels. In financial contexts, biodiversity loss represents a systemic risk driver that can erode natural capital, disrupt supply chains, and trigger regulatory or reputational consequences for exposed companies.
Note
biodiversity loss means that the web of life — species, habitats, and the ecological processes that sustain them — is shrinking. For investors, this matters because many industries depend on healthy ecosystems (agriculture, pharmaceuticals, tourism) and face material risk when those ecosystems degrade. ISS ESG evaluates corporate exposure to biodiversity-loss drivers as part of its nature-related analytics.
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Some money managers have launched funds that consider corporate impacts on biodiversity. The biodiversity loss and the ecological footprint Our planet’s biocapacity is the ability of its ecosystems to regenerate[3], providing people with biological resources a
— World, investors gear up action to combat biodiversity loss and related risks…
Antonio Celeste, Director for Sustainability Product Management at STOXX spoke to Climate Action about how investors should urgently mitigate against biodiversity loss. He goes on to describe the sector as being at the dawn of a revolution that will embrace a wide range of biodiversity-related data and intelligent s
— Antonio Celeste on how investors should urgently mitigate against biodiversit…
Unlike greenhouse gas emissions, deciding on a global, universally-agreed metric for biodiversity loss is not easy. Specific, localized quantitative indicators that don’t sacrifice quality for greater coverage are needed.
— Responsible Investing Zeroes in on Biodiversity in Momentous 2021 | Blog post…
A healthy economy depends on a healthy planet. What is biodiversity impact investing? Besides significant economic consequences, biodiversity loss can also create physical, transition, systemic and regulatory risks for companies and investors.
— ISS STOXX Biodiversity Indices | STOXX
SUSTAINABILITY SOLUTIONS Biodiversity Impact Assessment Tool Assess your portfolio’s impact on biodiversity. Global biodiversity loss can lead to operational, legislative, and reputational risks for investors, but many lack the information needed to conduct a holistic risk assessmen
Brown Revenue
▰▰▰ 47
Revenue derived from business activities associated with fossil fuels and other high-carbon sectors, including thermal coal mining, oil and gas extraction, and fossil-fuel-based power generation.
Note
brown revenue is the money a company earns from activities that are considered environmentally harmful. It is the conceptual opposite of green revenue. Index providers like STOXX use brown-revenue thresholds to exclude companies from climate benchmarks.
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(UN SDG) 13, Climate Action. Green and brown energy revenue shares will be used in the construction of the indices to ensure the total green share / brown revenue share of the STOXX Climate Transition Benchmark Indices is at least equivalent to that of the underlying benchmarks’ green to brown revenue shares. i
— Stoxx Index Guide (PDF), p. 616
(UN SDG) 13, Climate Action. Green and brown energy revenue shares will be used in the construction of the indices to ensure the total green share / brown revenue share of the STOXX Climate Transition Benchmark Indices is at least equivalent to that of the underlying benchmarks’ green to brown revenue shares. i
— Stoxx Index Guide (PDF), p. 616
Goal (SDG) 13, Climate Action. Green and brown energy revenue shares will be used in the construction of the index to ensure the total green share / brown revenue share of the index is at least four times that of the underlying benchmark’s green to brown revenue shares. xix.
C
Carbon Budget
▰▰▰▰ 92
Quote
“The carbon budget tells us exactly how much CO2 humanity can still emit. It is the hard physical constraint that all climate finance must respect.”
— Myles Allen, Oxford climate scientist, lead author of the IPCC 1.5C report
The maximum cumulative amount of carbon dioxide (CO2) emissions permitted over a period of time to keep global warming within a specified temperature limit (e.g., 1.5 C or 2 C above pre-industrial levels).
Note
a carbon budget is the total “allowance” of CO2 the world can still emit before crossing a dangerous temperature threshold. Companies and portfolios can be assessed against their fair share of the remaining global budget.
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= (cid:2919) (cid:2919) Standard deviation of the 95% lowest cb_os in the population IEA NZE Scenario 2050 Projected Emissions −IEA NZE Scenario 2050 Carbon Budget cb_os =max(cid:3436)0, (cid:2919) (cid:2919)(cid:3440) (cid:2919) IEA NZE Scenario 2050 Carbon Budget (cid:2919) STOXX INDEX METHODOLOGY
— Stoxx Index Guide (PDF), p. 281
This data will be used to overweigh climate leaders, and climate laggards will be underweighted. x. Carbon Budget: ISS ESG Carbon Budget data helps assess companies’ alignment with different scenarios.
— Istoxx Index Guide (PDF), p. 621
s tend to have lower carbon emissions than the market benchmark, a side effect of its stock-picking methodology. “It means that we are investing that carbon budget in those things that are going to benefit from the transition,” David said.
— STOXX WTW Climate Transition Indices: Replacing decarbonized portfolios with …
is to ensure that the index is aligned with the decarbonization trajectory for the IEA Net Zero by 2050 temperature scenario until 2050. A company’s Carbon Budget Risk is calculated as: ∑𝑐𝑎𝑟𝑏𝑜𝑛 𝑏𝑢𝑑𝑔𝑒𝑡 − ∑𝑐𝑎𝑟𝑏𝑜𝑛 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑖,𝑗 𝑖,𝑘 𝐶𝐵𝑅 =− 𝑖 ∑𝑐𝑎𝑟𝑏𝑜𝑛 𝑏𝑢𝑑𝑔𝑒𝑡 𝑖,𝑗 Where: j = 2020, …, 2050 k = 2020, …, current year e Tr
— Results Of Market Consultation On Proposed Changes To The Methodology Of The … (PDF), p. 3
Adjusting the treatment of companies without science-based targets helps mitigate tracking error and reflects market realities. Updating the carbon budget model is necessary due to the decommissioning of the current scenario, while adding a tracking error constraint supports performance stability. Final
Carbon Capture and Storage (CCS)
▰ 1
A suite of technologies that capture carbon dioxide emissions at their source (e.g., power plants, industrial facilities) or directly from the atmosphere, transport the captured CO2, and store it permanently in deep geological formations or utilize it in industrial processes.
Note
CCS is a way to grab CO2 before it enters the atmosphere (or pull it back out) and lock it away underground. While CCS is not a substitute for reducing emissions at source, the IEA Net Zero Pathway identifies it as essential for decarbonizing hard-to-abate sectors like cement and steel. ISS ESG tracks corporate CCS capacity and investment as an indicator of transition readiness.
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to promote ‘negative’ emissions strategies including carbon removal, she told the audience. “The math at the moment is not working out,” Lutz said. “Carbon capture and storage, and even less so carbon removal, are not that much on the agenda. I do think, yes, we will see this come more on the agenda.” “What we see if you ag
— Taking Temperature Part 2: US Enters Climate Financial Regulation Era | Blog …
Carbon Credit
▰ 2
A tradable certificate or permit representing the right to emit one metric ton of CO2 equivalent, or representing one metric ton of CO2 equivalent that has been reduced or removed from the atmosphere. Carbon credits are generated under compliance schemes (e.g., EU ETS) or voluntary standards (e.g., Verra, Gold Standard).
Note
a carbon credit is a permit that lets a company release one ton of CO2 — or proof that one ton has been kept out of the atmosphere. Companies can buy credits to meet regulatory obligations or voluntary climate commitments. ISS ESG assesses whether companies use credits as a credible part of their decarbonization strategy or as a substitute for genuine emissions cuts.
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ipated standards, companies will have to consider options such as: capital improvement to their facilities to reduce emissions, the cost of “trading” carbon credits on an open market to offset emission overages, or the expense of fines or restrictions resulting from noncompliance. Taft-Hartley Advisory Service
— 2013Isstafthartleyadvisoryservicesusguidelines (PDF), p. 58
torically was not really the domain of index providers.” Tom at FTSE Russell and Maya at S&P Dow Jones highlighted infrastructure, digital assets and carbon credit futures among investments that are getting more investor interest as they seek to diversify exposures. “The big thing in diversification is: it’s not
— Panel of experts explores transformation of index providers, products | Blog …
Carbon Pricing
▰ 4
Quote
“If you want less of something, tax it. A carbon price makes pollution expensive and clean alternatives competitive.”
— William Nordhaus, Nobel laureate in Economics (2018), pioneer of carbon pricing models
A policy mechanism that assigns a monetary cost to greenhouse gas emissions, either through a carbon tax (a fixed price per ton of CO2e) or an emissions trading system (ETS, also known as cap-and-trade, where a market price emerges from a capped supply of allowances).
Note
carbon pricing makes polluting more expensive. When companies have to pay for every ton of CO2 they emit, they have a financial incentive to cut emissions. ISS ESG models the financial impact of current and projected carbon prices on company earnings under different climate scenarios.
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, and transparency indicators. TRANSITION RISK Detailed assessment of company and portfolio exposure to transition risks and opportunities related to carbon pricing and demand changes, impacts on operating costs and revenues, fossil fuel reserves, power generation, and controversial energy extraction practices.
onization threshold and uniquely include forward-looking metrics to progressively exclude companies that have not committed to science-based targets. Carbon pricing Rodolphe concluded his participation by answering a question on whether he expected carbon pricing to eventually become integrated into equity indice
— Qontigo’s Bocquet: Both Standardization and Customization are Equally Needed …
Carbon Footprint
▰▰▰▰▰ 219
Quote
“A portfolio’s carbon footprint is the investor’s share of the emissions problem. Measure it, and you own it.”
— Patrick Bolton & Marcin Kacperczyk, “Do Investors Care about Carbon Risk?”, Journal of Financial Economics (2021)
The total greenhouse gas emissions caused directly and indirectly by an entity (company, portfolio, individual), usually expressed in metric tons of CO2 equivalent (tCO2e). For portfolios, the footprint is typically normalized per million dollars invested.
Note
a carbon footprint is a single number that captures how much climate pollution something is responsible for. Portfolio carbon footprint lets investors compare the emissions intensity of different funds.
where EVIC = Enterprise Value Including Cash.
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CARBON RISK RATING CARBON PERFORMANCE SCORE Carbon Performance Score looks at a company’s CO2 efficiency, risk management and measures to reduce the carbon footprint. CARBON RISK CLASSIFICATION Carbon Risk Classification takes into account the extent to which a company in a given industry is exposed to CO2 risks d
lves based on the Glasgow Financial Alliance for Net Zero (GFANZ) recommendations. Key Metrics – Corporates AVAILABLE REPORTS: Climate Impact Report, Carbon Footprint Report CARBON FOOTPRINT DATA Provides comprehensive analysis of financed emissions across Scopes 1, 2, and 3.
More details are available here https://www.issgovernance.com/file/publications/methodology/Carbon-Footprint-Methodology.pdf iSTOXX® METHODOLOGY GUIDE 618/1024 74. EURO iSTOXX AMBITION CLIMAT PAB INDEX The methodology ensures that the index expos
— Istoxx Index Guide (PDF), p. 617
TOXX 50® Low Carbon Index trailed the EURO STOXX 50 Index by 94 basis points last month. The STOXX Low Carbon Indices were designed to help lower the carbon footprint of portfolios and use data from CDP and ISS ESG. Risk and return characteristics Return (%) Annualized volatility (%) EUR USD EUR USD 1M YTD 1Y 1M YT
— Monthly Index News July 2020 (PDF), p. 11
Our tools support informed decision-making, risk management, and development of resilience strategies. Our holistic suite includes physical risk, carbon footprinting and scenario alignment capabilities. Real Asset Portfolio-Level Climate Risk Tools Identify and quantify climate-related risks to real assets usin
Carbon Intensity
▰▰▰▰ 184
Greenhouse gas emissions per unit of economic output, commonly expressed as tCO2e per million USD of revenue or per unit of product.
Note
carbon intensity tells you how “dirty” each dollar of a company’s revenue is. A steel company and a software company may have similar total emissions, but the steel company’s carbon intensity per dollar of revenue will be far higher.
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hin 0.999 and 1 of 𝐼 where 𝐼 is the minimum of 50% of the total carbon intensity of the parent index 𝑡 𝑡 or a 7% reduction from the previous period’s carbon intensity exposure, with EVIC adjusted for inflation. • Security level carbon intensity data is defined as (Scope 1+2+3 emissions from ISS ESG) / (Enterprise v
— Istoxx Index Guide (PDF), p. 316
Using user-provided data, the model estimates Scope 1, 2, and 3 emissions, including Emissions Exposure and Weighted Average Carbon Intensity to assess carbon impact. When valuation data is available, financed emissions are calculated, offering deeper insights into climate impact. Our forwa
— Climate and Nature Ongoing Innovation | ISS
PER THE FORMER GUIDE TO THE DAX STRATEGY INDICES Effective Creation of Version 3.48 2 2/08/2023 − Clarification of the currency used to calculate the Carbon Intensity for DAX ESG Target (chapter 3.18.1) Effective Creation of Version 3.47 0 2/06/2023 − Termination of idDAX Leveraged/Short NC indices Effective Creati
— Dax Strategy Index Guide (PDF), p. 52
1 43 430 72 72 Email: customersupport@stoxx.com Market consultation (applies c) 50% or higher revenues from power STOXX PAB generation with carbon intensity of lifecycle 50% or higher revenues from extraction of indices only) GHG emissions higher than 100g CO2e/kWh.
— Market Consultation Stoxx Index 20250925 (PDF), p. 2
This constraint is not applied to the Utilities supersector. » Total carbon intensity reduction: A reduction of at least 30% relative to the parent. Carbon intensity = (Scope 1 + Scope 2 GHG emissions)/revenue (EUR million) » Sustainab
— Dax Equity Index Methodology Guide 5526498614 (PDF), p. 57
Climate Analytics
▰ 4
A suite of quantitative tools and datasets — provided by firms such as ISS ESG — that assess corporate and portfolio exposure to climate-related risks and opportunities, including carbon footprinting, scenario analysis, temperature alignment, and physical risk scoring.
Note
climate analytics is the data engine behind sustainable investing. It translates raw emissions data, weather models, and policy scenarios into actionable metrics that portfolio managers can use.
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SUSTAINABILITY SOLUTIONS / CLIMATE SOLUTIONS Climate Analytics Manage your exposure to climate-related risks. Providing Comprehensive Carbon and Climate Data Solutions Our dedicated team of experts provides marke
d Nature Data Solutions allow access to high quality, granular data sets to meet regulatory and client requirements. The solutions include a suite of climate analytics to monitor and mitigate climate-related impact, assess temperature scenarios at both the issuer and portfolio level, understand the impact of physica
— Climate and Nature Solutions | ISS
ving ESG data landscape. Join our Panel Discussion 16:05 – 16:50 EST: The role of ESG data in the transition to net zero Sam Schrager, our Head of US Climate Analytics, will be speaking on this panel alongside experts from Futurepast, Moody’s Analytics, Ortec Finance, Science Based Targets Initiative, and Natixis. E
— Environmental Finance – The Future of ESG Data Americas 2023 | ISS
derweight the laggards. “We are delighted that ISS ESG’s market-leading energy, extractives and climate data provide forward-looking insights via our climate analytics for one of the winning mandates in this ground-breaking Paris-Aligned investment program.” said Marija Kramer, Head of ISS ESG. With its ESG ecosyste
— Qontigo Congratulates Amundi On Winning Objectif Climat Mandate From Leading …
Climate Scenario Analysis
▰▰ 6
A forward-looking exercise that models the potential impact of different climate pathways (e.g., 1.5 C, 2 C, 3 C+ warming) on a company’s or portfolio’s financial performance, considering both transition risks and physical risks.
Note
scenario analysis asks “what if?” questions: What happens to this company’s profits if governments impose a high carbon tax? What if global temperatures rise by 3 C? ISS ESG provides scenario-aligned data for regulatory stress tests and strategic planning.
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Furthermore, these reports can help investors address key internal and external climate disclosures, including TCFD-based reporting initiatives where climate scenario analysis and scenario alignment are core elements of their disclosure requirements. Portfolio Analytics – Corporates Our proprietary analytics tools on our Da
Climate Solutions Max Horster started one of the first companies to measure the climate impact on investments. From investment carbon footprinting to climate scenario analysis, from climate-linked proxy voting to climate neutral investments via offsets: over the years, the team pioneered a wide range of today’s leading meth
— Asia-Pac ESG Trends & Outlook | ISS
The NGFS, which turned three years old in December, last year published a guide on climate scenario analysis that is geared to policymakers and supervisors but is also useful for financial firms. 2020 was an important year in terms of climate-related legisla
— Qontigo Summit Explores Climate Change Risk for Investors, Regulators | Blog …
While a variety of projections and scenarios are available in the ISS climate scenario analysis toolkit, Figure 5 below shows the International Energy Agency’s 2050 Net Zero Scenario alignment, considering company-announced emissions targets.
— Europe’s ‘GRANOLAS’ stocks: A sustainability and climate perspective | Blog p…
hmark Index portfolio against those of its benchmark, the STOXX® Europe 600 Index. The largest reduction in emissions comes from Scope 3 emissions. A climate scenario analysis additionally displays companies’ current and future direct emissions relative to their carbon budgets, so investors can understand the climate scenar
— Research Paper Examines New STOXX EU-Compliant Climate Benchmarks | Blog post…
Circular Economy
▰▰ 14
Quote
“A circular economy is restorative by design. It aims to keep products, components, and materials at their highest utility and value at all times.”
— Ellen MacArthur Foundation, Towards the Circular Economy (2013)
An economic model that replaces the traditional linear “take-make-dispose” approach with systems designed to eliminate waste, circulate products and materials at their highest value, and regenerate natural systems. In sustainability investing, circular-economy alignment is assessed by examining a company’s use of recycled inputs, product longevity, and end-of-life recovery.
Note
a circular economy keeps resources in use for as long as possible. Instead of mining new raw materials, manufacturing a product, and sending it to a landfill, companies design for reuse, repair, and recycling. ISS ESG and STOXX use circular-economy criteria in thematic indices that track companies enabling or adopting circular business models.
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An Investor’s Guide to the Circular Economy JULY 14, 2022 KEY TAKEAWAYS - Humanity’s current global consumption patterns would require the resources of 2.3 planet Earths by 2050.
— An Investor’s Guide to the Circular Economy | ISS
Firstly the revenue data provides another lens to assess how a company’s business model is aligned with themes such as climate change or circular economy. The product focus looks beyond traditional sectors to understand who contributes to the value chain for areas such as clean energy systems, efficien
— Mapping companies’ contributions to sustainability goals: Quantifying alignme…
To mitigate these risks and enhance sustainability performance, companies can adopt circular economy approaches, including recycling and resource-efficient practices. This publication series from ISS STOXX’s Research Institute, in collaboration with
— Critical Minerals Series: Sustainability Considerations for Investors in Lith…
This gives investors another lens with which to view their portfolio, rather than just the UN SDG lens. - The circular economy: Our framework already captures many circular products/services, such as recycling activities, sustainable product alternatives and Product-as-a-Serv
— Combatting greenwashing with transparent and verifiable data | Blog posts | S…
We expect this interest to keep pace in 2023 and beyond, around topics such as clean energy, biodiversity and the circular economy. New systems in thematic investing Most STOXX thematic indices employ a stock selection methodology based on companies’ revenue streams, a direct and
Climate Litigation
▰ 1
Legal proceedings brought against companies, governments, or other entities for their contribution to climate change, failure to adapt to climate impacts, or misrepresentation of climate-related risks and strategies. Climate litigation is an emerging source of transition risk that can result in damages, injunctions, or mandatory disclosure.
Note
climate litigation is the growing wave of lawsuits accusing companies of causing climate harm or misleading investors about climate risks. A fossil-fuel company sued for decades of emissions, or a corporation accused of greenwashing, faces climate litigation risk. ISS ESG tracks pending and resolved climate-related legal actions as part of its controversy monitoring.
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n companies that are involved in lobbying against reasonable regulation on climate change, and activists and other bodies are increasingly turning to climate litigation as a way of pressuring companies to up their game.
Climate Transition
▰▰▰▰▰ 459
Quote
“The climate transition is the greatest reallocation of capital in history. Every company, every portfolio, every asset class will be repriced.”
— Mark Carney, UN Special Envoy on Climate Action and Finance
The systemic shift of an economy, sector, or company from high-carbon to low-carbon operations, encompassing changes in energy sources, industrial processes, business models, and capital allocation.
Note
climate transition is the journey from fossil-fuel dependence to a sustainable economy. STOXX Climate Transition Benchmark (CTB) indices track companies that are actively on this journey, weighting them by their progress.
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The other two are physical risk and liability risk. The relevance of climate transition risk means that “we are not going to come anywhere near meeting our climate goals just by decarbonizing our supply chains and buying offsets,” said D
— STOXX WTW Climate Transition Indices: Replacing decarbonized portfolios with …
We then feed those impacts into our company, equity and fixed-income valuation models. “The STOXX Willis Towers Watson Climate Transition indices (CTIs) are underpinned by the CTVaR methodology. They tilt away from companies with high exposure to climate transition risk and that are lik
— Q&A with WTW’s David Nelson: Managing a portfolio’s climate transition ri…
In other words, 3% of the starting global index is at risk from the transition to a net-zero economy. (Figure 1). Figure 1: Climate transition value at risk While not an explicit component of the methodology, the World CTI also looks better on other sustainability metrics.
— Climate Transition Indices – A risk profile analysis | Blog posts | STOXX
Navigating the Climate Transition: From Portfolio Construction to Reporting Learn from ISS STOXX leaders about how we support a diverse range of institutional clients with an integrat
— Navigating the Climate Transition: From Portfolio Construction to Reporting |…
Sight, Willis Towers Watson’s defined contribution master trust, announced it was investing nearly $1 billion in the STOXX Willis Towers Watson World Climate Transition Index. Overall, the panel was an enlightening addition to the debates taking place at COP26.
— A view from COP26: navigating the climate transition with investable indices …
D
Decarbonization Pathway
▰▰▰▰ 64
A time-bound trajectory that specifies the rate at which a company, sector, or portfolio must reduce its greenhouse gas emissions to align with a given temperature target (typically 1.5 C or well-below 2 C). EU Climate Benchmark regulation requires a minimum 7% year-on-year self-decarbonization for Paris-Aligned Benchmarks.
Note
a decarbonization pathway is a roadmap with milestones: “By 2030, cut emissions by X%; by 2040, by Y%.” STOXX uses these pathways to rebalance climate benchmark indices each year, progressively reducing their carbon intensity.
where is the annual decarbonization rate (e.g., 7% for PAB) and is years since the base year.
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hts into climate impact. Our forward-looking scenario alignment framework helps assess how real asset portfolios are positioned against science-based decarbonization pathways, in reference to CRREM. By projecting Scope 1 and 2 emissions and comparing them to granular benchmarks, differentiated by building type and region,
— Climate and Nature Ongoing Innovation | ISS
“However, this new solution can allow the investor to enhance their environmental objectives, improve ESG profiles and achieve a net-zero decarbonization pathway, while also targeting a lower risk profile than a broad market benchmark.” “The research process was a truly collaborative effort carried out by LGIM
— LGIM switches to iSTOXX World Min Vol ESG index for pension fund mandate | Bl…
The CTIs look beyond carbon emissions and make a forward-looking, bottom-up evaluation of asset repricing risks in a decarbonization pathway. Among the STOXX Low Carbon indices, the EURO STOXX 50® Low Carbon index (6%) beat the EURO STOXX 50 by 17 basis points in December but trailed by 40
— Stocks rise in December, post third straight year of double-digit gains | Blo…
targets: - The Absolute Contraction Approach (ACA), defined as ‘a one-size-fits-all method” that ensures companies cut emissions in line with global decarbonization pathways.’ This is the most popular approach.8 - The Sectoral Decarbonization Approach (SDA)9 is an alternative method that uses sector-specific intensity me
— Science-Based Targets – A Key Piece in the Climate-Alignment Puzzle | Blog po…
al emissions is covered by a tax, and “ridiculously low” prices can’t “drive a shift in the business model and the allocation of capital to reach the decarbonization pathways that we need to be on.” Finally, the NYDFS’ Chen said efforts must be simultaneously focused on more regulation and on a US carbon tax. “Both are ne
— Taking Temperature Part 2: US Enters Climate Financial Regulation Era | Blog …
Deforestation Risk
▰ 2
The likelihood that a company’s operations or supply chain contribute to the clearing of forests, either directly (land conversion) or indirectly (sourcing commodities linked to deforestation such as palm oil, soy, beef, or timber).
Note
deforestation risk flags companies whose business depends on products that drive forest loss. ISS ESG evaluates supply-chain exposure and corporate no-deforestation commitments.
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used on deforestation, particularly of tropical forests. This report is set to answer the question: How are global institutional investors exposed to deforestation risks in their investment portfolios, and how can they assess and mitigate those risks—and related impacts and dependencies—while capitalizing on nature-b
— NCRI Deforestation Report | ISS
their current carbon emissions, exposure to fossil fuels and use of clean technology, and their future strategies for managing long-term climate and deforestation risks. Analysis of 50 of the best-rated equity funds under Climetrics’ new methodology found that two-thirds have above-average investment in companies wi
— European investment funds rated on alignment with 2°C Paris climate target | ISS
E
Energy Efficiency
▰▰▰▰ 70
The ratio of useful energy output to total energy input for a given process, building, or economy. In sustainability investing, energy efficiency measures a company’s ability to deliver the same products or services using less energy, thereby reducing costs and emissions.
Note
energy efficiency means doing more with less energy — better insulation, smarter motors, LED lighting, industrial heat recovery. ISS ESG evaluates corporate energy-efficiency programs and targets as indicators of transition readiness, while STOXX includes energy-efficiency solution providers in its green-revenue classifications.
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, or controversy related to its GHG emissions; and ▪ Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive. Energy Efficiency Sustainability Policy Recommendation: Generally vote for proposals requesting that a company report on its energy efficiency policies. 21 Variations
— Sustainability Us Voting Guidelines (PDF), p. 70
energy efficiency policies, unless: ▪ The company complies with applicable energy efficiency regulations and laws, and discloses its participation in energy efficiency policies and programs, including disclosure of benchmark data, targets, and performance measures; or ▪ The proponent requests adoption of specific en
— Us Voting Guidelines (PDF), p. 63
, as the green bond market expands, it may be more appropriate to compare the Carbon Yields within a region or on a peer basis. 2) Projects targeting energy efficiency show mixed results. The context in which, and the sector and technology where these efficiencies take place, matters.
— Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield O…
Proxy Voting Guidelines - 75 - Transparency. Inclusiveness. Global Expertise 8c-4. Energy Efficiency Reducing the negative impact to the environment can be done through the use of more energy efficient practices and products.
— 2014Isscatholicusaguidelines (PDF), p. 76
The materials sector would need more investment to increase material and energy efficiency, and the use of renewables. In addition, the energy transition will also require a significant supply of critical minerals, and this is reflected in
Energy Transition
▰▰▰ 37
Quote
“The energy transition is not a choice between growth and climate. Renewables are now the cheapest source of new electricity generation in most of the world.”
— Fatih Birol, Executive Director of the International Energy Agency (IEA)
The global shift from fossil-fuel-based energy systems (coal, oil, natural gas) to low-carbon and renewable sources (solar, wind, hydrogen, nuclear), accompanied by changes in infrastructure, policy, technology, and consumer behavior.
Note
the energy transition is the move away from burning fossil fuels toward cleaner alternatives. It is the single largest component of the broader climate transition. STOXX and ISS ESG use energy-transition metrics — such as renewable energy capacity, fossil-fuel revenue share, and capex alignment — to construct climate benchmarks and thematic indices.
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The STOXX Global Lithium and Battery Producers index covers an area of increasing investor interest, allowing them to tap the energy transition metals theme through the companies that stand to benefit most from growing demand. [1] The “big shovel” was a phrase used by Daniel Yergin, a renowne
— New iShares ETF tracking STOXX Global Lithium and Battery Producers index off…
Leading the charge are themes including artificial intelligence (AI), digital assets, energy transition metals and, most recently, the defense sector. STOXX has launched indices covering these themes, many which now underlie investable products. Defense
— Thematic indices: Capturing trends from AI to defense to transition metals | …
ansition to electric transportation, allowing investors to gain exposure to a future chapter in the modern mobility megatrend. Positioned for growth: Energy transition metals Elsewhere, investors can also target the electric-car revolution via the high-growth sector of energy transition metals, through new and plann
— The future of mobility: thematic investing in the clean transport revolution …
Discrepancy between decarbonisation commitments and the transition to a low carbon energy transition: required actions to achieve the transition. 1. Evaluate progress towards low carbon economy: Obser- 2.
— Feri Cfi Iss Ethix Executive Summary (PDF), p. 1
Alongside the inclusion of negative contributions there were several additional enhancements including methodology refinements relating to the energy transition and built-in indicators of changes in the data. In response to user demand, the SDI AOP will be increasing the frequency of data releases to quarterl
— SDI AOP introduces significant enhancements to dataset for investing in the U…
Environmental Footprint
▰ 2
The total environmental impact of an entity — company, product, or portfolio — measured across multiple dimensions including greenhouse gas emissions, water use, land use, resource depletion, and pollution. It extends beyond carbon to provide a holistic view of environmental pressure.
Note
an environmental footprint is a broad scorecard of how heavily a company treads on the planet. While a carbon footprint focuses only on emissions, an environmental footprint also captures water consumption, waste generation, and ecosystem disruption. ISS ESG provides multi-dimensional environmental footprint data for corporate sustainability assessments.
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Together, we foster an environment that fuels creativity, drives innovation, and shapes our future success. Environment Reducing the environmental footprint of our business operations and committing to the 1.5C goal of the Paris agreement. Business Providing clients with objective and varied analyses and
ur business. Environment ISS recognizes a shared responsibility to improve sustainability beyond our products and services, as we aim to minimize our environmental footprint throughout our operations. We are committed to conducting our business in compliance with all applicable environmental laws and regulations.
F
Financed Emissions
▰▰ 16
Quote
“For banks, financed emissions dwarf their operational footprint. A bank’s real carbon exposure is not its office lights; it is its loan book.”
— Partnership for Carbon Accounting Financials (PCAF), Global GHG Standard for the Financial Industry
The greenhouse gas emissions attributable to a financial institution’s lending and investment activities, calculated by apportioning a borrower’s or investee’s emissions according to the institution’s share of financing.
Note
financed emissions answer the question: “How much pollution is my bank or fund responsible for through the money it lends and invests?” This is a Scope 3, Category 15 emission for financial institutions.
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Source excerpts (5)
1, 2, and 3 emissions, including Emissions Exposure and Weighted Average Carbon Intensity to assess carbon impact. When valuation data is available, financed emissions are calculated, offering deeper insights into climate impact. Our forward-looking scenario alignment framework helps assess how real asset portfolios
— Climate and Nature Ongoing Innovation | ISS
Information that will be considered where available includes the following: ▪ The completeness, feasibility, and rigor of the company’s financed emissions disclosure; ▪ Whether the company’s decarbonization targets and climate transition plan are in alignment with the Paris Agreement, the International
— Sustainability Us Voting Guidelines (PDF), p. 69
Information that will be considered where available includes the following: ▪ The completeness, feasibility, and rigor of the company’s financed emissions disclosure; WWW.ISSGOVERNANCE.COM 86 of 106 UNITED STATES 2025 CATHOLIC FAITH-BASED PROXY VOTING GUIDELINES ▪ Whether the company’s target
— Catholic Faith Based Us Voting Guidelines (PDF), p. 86
Information that will be considered where available includes the following: ▪ The completeness, feasibility, and rigor of the company’s financed emissions disclosure; ▪ Whether the company’s decarbonization targets and climate transition plan are in alignment with the Paris Agreement, the International
— Sustainability Us Voting Guidelines (PDF), p. 69
Information that will be considered where available includes the following: ▪ The completeness, feasibility, and rigor of the company’s financed emissions disclosure; ▪ Whether the company’s decarbonization targets and climate transition plan are in alignment with the Paris Agreement, the International
Green Bond
▰▰▰ 34
Quote
“Green bonds channel private capital directly into climate solutions. They are the fixed-income market’s answer to the transition finance gap.”
— Sean Kidney, CEO of the Climate Bonds Initiative
A fixed-income instrument whose proceeds are exclusively allocated to finance or refinance projects with clear environmental benefits, such as renewable energy, energy efficiency, clean transportation, or sustainable water management.
Note
a green bond is a loan that a company or government raises specifically to fund environmentally friendly projects. ISS ESG provides second-party opinions (SPOs) that verify whether a bond qualifies as “green” under frameworks like the ICMA Green Bond Principles.
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Source excerpts (5)
e metric that can be used by a variety of stakeholders, such as issuers, investors and analysts. The methodology looks at the projects financed via a green bond and then allocates to the bond the greenhouse gas emissions (GHG) mitigated based on the projects’ capital structure.1 Since 2008, green bonds have p
— Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield O…
ISS ESG Market Study – How to analyze the sustainability credentials of green bonds? June 25, 2019 | 3 pm CEST | 9 am EST ISS ESG hosted a webinar on green bonds and how they can be analyzed from an investor’s perspective and includ
To read about the Climate Impact and Climate Awareness indices tracking companies in transition towards sustainability leadership, click here. A green bond boom One segment that is seeing strong inflows is that of green bonds, used to finance low-carbon and climate-resilient infrastructure projects. Issu
— Outlook 2018 IV: the Road to Wider ESG Integration | Blog posts | STOXX
2022 across an array of regulatory areas (taxonomies, ESG and climate risk management and disclosures, product requirements, ESG in stewardship, and green bond frameworks). - Regulatory efforts continue to prioritize management of climate-related financial risk as well as preventing greenwashing, although th
— The Depth & Breadth of Sustainable Finance Regulatory Initiatives: Global…
UC MSCI European Green Bond EUR UCITS ETF – the first ETF to provide investors with access to a broadly diversified range of liquid euro-denominated green bonds from European issuers.
— UniCredit launches ESG-screened Eurozone multi-factor and low vol ETFs | ETF …
Green Revenue
▰▰ 17
Revenue generated from products and services that deliver clear environmental benefits, including renewable energy generation, pollution prevention, sustainable agriculture, and circular-economy solutions. ISS ESG classifies revenue streams into granular green taxonomy categories.
Note
green revenue is the “clean” portion of a company’s income. STOXX uses green-revenue data to overweight companies earning more from sustainable activities and to screen for inclusion in sustainability indices.
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Source excerpts (4)
ISS ESG classifies revenues from renewable energy sources such as wind, solar, hydro, biomass and geo-thermal sources, and nuclear power as green revenues. In addition to these, the definition of green revenues extends to revenues that contribute to UN Sustainable Development Goal (SDG) 13, Climate Act
— Istoxx Index Guide (PDF), p. 618
ces: revenues coming from renewable energy sources such as: wind, solar, hydro, biomass and geothermal sources. Nuclear Power is also considered as a green revenue source. In addition to these, the definition of green revenues extends to revenues that contribute to UN Sustainable Development Goal (SDG) 13, Clima
— Stoxx Index Guide (PDF), p. 278
ces: revenues coming from renewable energy sources such as: wind, solar, hydro, biomass and geothermal sources. Nuclear Power is also considered as a green revenue source. In addition to these, the definition of green revenues extends to revenues that contribute to UN Sustainable Development Goal (SDG) 13, Clima
— Stoxx Index Guide (PDF), p. 278
In “ESG 2.0,” clients want indices that look at a company’s management quality, its green revenues and its sustainability performance relative to peers, and reward the impact leaders, he said.
— Panel of experts explores transformation of index providers, products | Blog …
Greenhouse Gas (GHG)
▰▰▰▰▰ 431
Any gas that absorbs and re-emits infrared radiation in the atmosphere, thereby contributing to the greenhouse effect and global warming. The principal GHGs are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).
Note
greenhouse gases act like a blanket around the Earth, trapping heat. CO2 is the most abundant, but methane is far more potent per molecule. All GHG emissions are converted to a common unit — CO2 equivalent (CO2e) — using Global Warming Potential (GWP) factors.
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Source excerpts (5)
Intensity = (Scope 1 + Scope 2 GHG emissions) / Revenue (USD million) The data consists of both reported and estimated data. Scope 1 refers to direct greenhouse gas emissions coming from sources owned or controlled by the company, whereas Scope 2 accounts for indirect greenhouse gas emissions from consumption of
— Istoxx Index Guide (PDF), p. 500
Social Advisory Services Recommendation: For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain3, greenhouse gas (GHG) emitters, through their operations or value chain3, generally vote against the board chair or the responsible incumbent director(s), generally vote a
— Sri International Policy Updates (PDF), p. 9
A) Net Zero Emissions by 2050 Scenario, and other internationally recognized frameworks; ▪ Whether the company’s methodology is in alignment with the Greenhouse Gas Protocol (GHG Protocol), the Partnership for Carbon Accounting Financials (PCAF), and other generally accepted calculation and reporting methodologie
— Sustainability Us Voting Guidelines (PDF), p. 69
The CDP is a global not-for-profit organization, founded in 2000 and headquartered in London, which encourages corporations to disclose their greenhouse gas emissions and exposure to water and forest risk. The last time BP and Shell faced shareholder resolutions was in 2010 on the topic of tar sands.
— Rare U.K. Shareholder Proposal Receives Rarer Company Support | ISS
X [3] While the STOXX Biodiversity framework sets a defined target to reduce a portfolio’s carbon emission, the TNFD recommendations clearly identify greenhouse gas emissions as a cause of indirect negative impact on biodiversity, making it imperative to reduce them in the fight for nature. For a detailed explana
— TNFD recommendations set path for nature-related disclosure standards, suppor…
Greenwashing
▰▰▰ 43
Quote
“Greenwashing corrodes trust in sustainable finance. If investors cannot distinguish real ESG commitment from marketing, capital flows to the wrong places.”
— ESMA (European Securities and Markets Authority), Sustainable Finance Roadmap (2022)
The practice of making misleading, unsubstantiated, or exaggerated claims about the environmental benefits of a product, service, company, or investment fund. In the financial sector, greenwashing includes overstating a fund’s ESG credentials, selectively disclosing favorable climate metrics, or marketing as “sustainable” without substantive alignment to recognized standards.
Note
greenwashing is when companies or fund managers talk a bigger climate game than they actually play. Regulators (including the EU via SFDR and the Benchmark Regulation) and data providers like ISS ESG work to detect and flag greenwashing by verifying claims against actual performance data, taxonomy alignment, and controversy records.
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Source excerpts (5)
Market Views: How to spot greenwashing As investor interest in sustainable assets continues to rise, a big challenge is how to ensure fund managers live up to their ESG claims. By 2025, as
— Market Views: How to spot greenwashing | ESG | AsianInvestor
asset owners and asset managers and have regular sessions where users can share their challenges and contribute to the development of the solutions. Greenwashing and Greenhushing concerns are top of mind for many, as they seek to ensure the validity of their sustainable investment approach and effectively comm
— Combatting greenwashing with transparent and verifiable data | Blog posts | S…
(SBTis). Some key findings in the whitepaper are: Most ESG ETFs looked good on a variety of metrics (in other words, there was no glaring evidence of greenwashing) All funds ranked better than their benchmark on at least eight out of the 17 metrics (Exhibit 1).
— Qontigo whitepaper examines the sustainability accomplishments of ESG funds |…
Aligned, and the iSTOXX MUTB EURO Paris Aligned indices provide investors with investable portfolios that meet the Paris Agreement objectives without greenwashing. The indices are compliant with the Paris- Aligned Benchmark regulations.
— Istoxx Index Guide (PDF), p. 313
’s classification under the emerging ESG framework? “Ossiam welcomes the initiatives from regulators to increase transparency in the market and avoid greenwashing. The Sustainable Finance Disclosure Regulation (SFDR) classification is now widely used by clients to monitor and select their investments.
— Ossiam’s Lacroix: Maximizing the benefits of an ESG index strategy with an eq…
H
High-Emitting Sectors
▰ 4
Industry sectors identified under the EU Climate Benchmark Regulation (and by ISS ESG) as contributing disproportionately to global greenhouse gas emissions. These include energy, utilities, materials, transportation, and buildings. Companies in these sectors face stricter inclusion criteria and higher decarbonization expectations in PAB and CTB indices.
Note
high-emitting sectors are the industries most responsible for climate change. STOXX climate benchmarks must maintain at least equivalent aggregate exposure to these sectors as the parent index, ensuring the benchmark does not simply “divest” from the problem.
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Source excerpts (4)
They incorporate sector-specific performance indicators, and include systematically important companies from high-emitting sectors that play a crucial role in the climate transition. The new suite of indices is aligned with net-zero frameworks developed by investor groups in the
— Monthly Index News January 2025 (PDF), p. 4
They incorporate sector-specific performance indicators, and include systematically important companies from high-emitting sectors that play a crucial role in the climate transition. The new suite of indices is aligned with net-zero frameworks developed by investor groups in the
— New ISS STOXX net zero indices adopt innovative, forward-looking approach to …
They incorporate sector-specific performance indicators, and include systematically important companies from high-emitting sectors. Antonio Celeste, Head of Sustainability, Index Product Management at STOXX, explains in an interview with Asset TV how the indices hand investors th
— Video: ISS STOXX net zero indices offer innovative, forward-looking approach …
e indicators Real-world sector-specific decarbonization metrics are used and the indices maintain exposure to systematically important companies from high-emitting sectors that play a crucial role in the climate transition. Compliance with key regulatory guidelines The ISS STOXX Net Zero Transition indices are aligned w
Habitat Loss
▰ 1
The reduction in the area or quality of natural environments — forests, wetlands, grasslands, coral reefs, and other ecosystems — caused by land-use change, urbanization, agriculture, pollution, or climate change. Habitat loss is the leading driver of biodiversity decline globally.
Note
habitat loss means that the places where wild species live are being destroyed, fragmented, or degraded. For investors, companies linked to habitat loss through their operations or supply chains face regulatory, reputational, and litigation risk. ISS ESG assesses corporate exposure to habitat-loss drivers as part of its biodiversity and nature-related risk analytics.
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Source excerpts (1)
iodiversity impact involves evaluating the effect that its operations and activities have on the local and global ecosystems. Biodiversity footprint, habitat loss, species impact and stakeholder engagement are some methods in which an organization’s impact on biodiversity can be quantified and qualified through
I
Implied Temperature Rise
▰▰ 6
A forward-looking metric that translates a company’s or portfolio’s projected greenhouse gas emissions pathway into a single temperature score (in degrees Celsius), representing the level of global warming that would result if the entire economy were as carbon-intensive as the entity being assessed.
Note
implied temperature rise answers: “If every company in the world behaved like this one, how hot would the planet get?” A score of 1.5 C means the company is aligned with the Paris Agreement; 3 C+ signals significant misalignment. ISS ESG calculates this metric using proprietary climate models.
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ENT Assessment of a portfolio’s alignment with up to 25 climate scenarios provided by leading models: e.g. IEA, OECM, and NGFS. The analysis includes implied temperature rise, cumulative alignment metrics, cross-point year, and transparency indicators. TRANSITION RISK Detailed assessment of company and portfolio exposure t
ntensity, this is a metric that is significantly influenced by these companies’ very large revenues. A separate forward-looking climate metric is the implied temperature rise (ITR), shown in Figure 5. For every company, given its current and projected emissions, as well as a global carbon budget, this metric provides an as
— Europe’s ‘GRANOLAS’ stocks: A sustainability and climate perspective | Blog p…
and region, we provide a precise view of climate alignment. Results for emissions are expressed as ‘overshoot’ or ‘undershoot’ and translated into an Implied Temperature Rise metric, available at both the individual asset and portfolio level. Enabling investors to evaluate climate risk exposure and alignment with decarboni
— Climate and Nature Ongoing Innovation | ISS
companies that have not committed with SBTi Temperature Score: ISS ESG provides the Implied Temperature Rise which quantifies the under/overshoot of the issuer to a global warming impact under the IEA scenario model using a Historical projected emissions app
— Stoxx Index Guide (PDF), p. 278
companies that have not committed with SBTi Temperature Score: ISS ESG provides the Implied Temperature Rise which quantifies the under/overshoot of the issuer to a global warming impact under the IEA scenario model using a Historical projected emissions app
J
Just Transition
▰▰ 16
Quote
“There is no climate justice without a just transition. We cannot decarbonize by abandoning the workers and communities that built the fossil-fuel economy.”
— Sharan Burrow, General Secretary of the International Trade Union Confederation
A framework for ensuring that the shift to a low-carbon economy is fair and inclusive, protecting the rights and livelihoods of workers, communities, and regions that depend on fossil-fuel industries or other high-carbon sectors. A just transition encompasses retraining programs, social safety nets, stakeholder engagement, and equitable distribution of the costs and benefits of decarbonization.
Note
a just transition means making sure that the move to clean energy does not leave coal miners, oil workers, and their communities behind. Investors increasingly evaluate whether companies have credible just-transition plans alongside their decarbonization strategies. ISS ESG integrates social and workforce indicators into its assessment of corporate transition readiness.
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Source excerpts (5)
Just Transition: Blending Social and Environmental Considerations April 25, 2024 Climate change mitigation efforts are sometimes accused of neglecting the human angl
— Just Transition: Blending Social and Environmental Considerations | ISS
▪ Vote for shareholder proposals seeking increased investment in renewable energy sources unless the terms of the resolution are overly restrictive. Just Transition Companies have faced proposals requesting disclosure on the “just transition” – addressing stakeholder concerns within a company’s value chain with r
— Catholic Faith Based Us Voting Guidelines (PDF), p. 87
er current policy assumptions, providing a visual representation of potential outcomes. It also examines portfolio-level cumulative alignment and the Just Transition Risk (JTR) at the 2050 horizon to assess long-term consistency with climate objectives.
epted calculation and reporting methodologies; and ▪ Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive. Just Transition Companies have faced proposals requesting disclosure on the just transition – addressing stakeholder concerns within a company’s value chain with reg
— Sustainability Us Voting Guidelines (PDF), p. 69
epted calculation and reporting methodologies; and ▪ Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive. Just Transition Companies have faced proposals requesting disclosure on the just transition – addressing stakeholder concerns within a company’s value chain with reg
M
Methane Emissions
▰▰ 18
Emissions of methane (CH4), a greenhouse gas with a Global Warming Potential roughly 80 times that of CO2 over a 20-year horizon. Major sources include oil and gas operations (venting and flaring), livestock, rice cultivation, landfills, and coal mining. Reducing methane is considered the fastest lever for slowing near-term warming.
Note
methane is a far more potent heat-trapping gas than CO2, but it breaks down faster in the atmosphere. Cutting methane emissions from leaking pipelines, open landfills, and livestock operations delivers rapid climate benefits. ISS ESG tracks corporate methane emissions and reduction targets, while STOXX climate benchmarks factor methane intensity into sector-level decarbonization requirements.
where is 28 (100-year) or 80 (20-year) per IPCC AR6.
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Source excerpts (5)
n just one year. That same year, shareholders filed resolutions at three additional companies asking them to report on how they are managing fugitive methane emissions. The shareholders argued that capturing and managing methane emissions is a win-win for companies as it represents an economic opportunity for the co
— U.S. Moves on Methane Emissions | ISS
GHG emissions reduction goal (10 proposals), with some asking companies to adopt a “net zero” GHG emissions goal (three resolutions). Resolutions on methane emissions are on the rise for 2016, moreover, with the California State Teachers’ Retirement System filing five of the 10 resolutions submitted on the topic. R
— Investors Continue Focus on Climate Change in the Wake of Paris Accord | ISS
on GHG emissions from company operations and/or products. ▪ Vote for shareholder proposals that request the company to disclose a report on reducing methane emissions and to assess the reliability of the company’s methane emission disclosures. Environmental Justice Companies have faced proposals addressing environm
— Sustainability Us Voting Guidelines (PDF), p. 68
gas emissions from companies’ operations and/or products. ▪ Vote for shareholder proposals that request the company to disclose a report on reducing methane emissions and to assess the reliability of the company’s methane emission disclosures. Environmental Justice Companies have faced proposals addressing environm
— Catholic Faith Based Us Voting Guidelines (PDF), p. 86
on GHG emissions from company operations and/or products. ▪ Vote for shareholder proposals that request the company to disclose a report on reducing methane emissions and to assess the reliability of the company’s methane emission disclosures. Environmental Justice Companies have faced proposals addressing environm
N
Nature-Related Risk
▰▰ 19
Financial risk arising from an organization’s dependencies and impacts on nature, encompassing biodiversity loss, ecosystem degradation, water scarcity, soil depletion, and ocean acidification. The TNFD framework categorizes these into physical risk, transition risk, and systemic risk related to nature.
Note
nature-related risk captures the idea that businesses depend on healthy ecosystems (pollination, clean water, stable soils) and face financial consequences when those systems break down. ISS ESG integrates nature-related metrics alongside traditional climate data.
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Taskforce on Climate-related Financial Disclosure (TCFD) and aims to develop risk management and disclosure guidelines to report and act on evolving nature-related risks. The standard-setting International Sustainability Standards Board (ISSB), which in May started a consultation on its next projects and priorities,
— Sustainability reporting regulation: midyear progress review by ISS ESG | Bl…
following clear, comparable and consistent information by companies, investors can better allocate capital to nature-focused strategies, and address nature-related risks of the physical, transition, systemic and regulatory types. What is the TNFD? The Taskforce, a government-supported global initiative, was launched
— TNFD recommendations set path for nature-related disclosure standards, suppor…
TNFD will deliver in 2023 a framework for organizations to report and act on evolving nature-related risks and opportunities. The ultimate goal is to orient global financial flows toward nature-positive outcomes. Europe is taking a strong lead in seeking
— World, investors gear up action to combat biodiversity loss and related risks…
act, assess temperature scenarios at both the issuer and portfolio level, understand the impact of physical and transitional climate risks and assess nature-related risks such as biodiversity loss and deforestation. Specific data solutions include: - Climate Impact Dataset - Scenario Analysis - Carbon Emissions Data -
— Climate and Nature Solutions | ISS
DWS last November launched the first ETFs tracking the new ISS STOXX® Biodiversity indices, a suite that integrates nature-related risks and opportunities through a comprehensive approach. Diversification and 3D investing The panel also touched upon diversification, a topic of utmost
— Panel of experts explores transformation of index providers, products | Blog …
Natural Capital
▰▰▰▰ 67
Quote
“Natural capital is not free. Every economy is a wholly owned subsidiary of the environment. Deplete natural capital and the economic dividends stop.”
— Robert Costanza, ecological economist, Nature (1997)
The stock of renewable and non-renewable natural resources — including air, water, soil, minerals, forests, wetlands, and biodiversity — that provide flows of ecosystem services (e.g., pollination, water filtration, carbon sequestration) underpinning economic activity and human well-being.
Note
natural capital is the planet’s “balance sheet” of natural assets. Just as a company’s financial capital can be depleted through overspending, natural capital can be run down through pollution, overextraction, and habitat destruction. ISS ESG evaluates corporate dependencies on natural capital and the risks of its degradation, informing nature-related financial disclosures.
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Source excerpts (5)
Natural Capital: The Next Evolution of Environmental Reporting October 9, 2025 The purpose of this paper is to provide a contextual overview of the state of play reg
— Natural Capital: The Next Evolution of Environmental Reporting | ISS
HOLIC FAITH-BASED PROXY VOTING GUIDELINES widespread recognition of the fact that Paris Agreement-aligned targets can only be achieved by integrating natural capital-related concerns. As such, there has been increased market uptake around natural capital disclosures and commitments, particularly around TNFD-aligne
— Catholic Faith Based Us Voting Guidelines (PDF), p. 88
Information that will be considered where available includes the following: ▪ The completeness, feasibility, and rigor of the company’s natural capital-related disclosure; ▪ Whether the company’s natural capital disclosure adequately incorporate governance, strategy, risk and impact management, and m
— Sustainability Us Voting Guidelines (PDF), p. 69
Given the imperative of protecting forests to address the world’s most pressing environmental challenges, the inaugural flagship study of ISS STOXX’s Natural Capital Research Institute is focused on deforestation, particularly of tropical forests. This report is set to answer the question: How are global instituti
— NCRI Deforestation Report | ISS
diversity helps maintain the balance of ecosystems by allowing different species to coexist and interact with each other in complex ways. A resilient natural capital ensures the delivery of services that are vital for our lives and is better able to adapt to changing environmental conditions.
Net Zero
▰▰▰▰▰ 351
Quote
“Net zero is not a slogan. It is the hard science of the carbon budget, translated into a target that every company and government can be held to.”
— IPCC AR6, Summary for Policymakers (2021)
A state in which the greenhouse gases emitted into the atmosphere are balanced by an equivalent amount removed, resulting in no net increase in atmospheric GHG concentrations. At the global level, net zero CO2 must be achieved by approximately 2050 to limit warming to 1.5 C.
Note
net zero means putting no more carbon into the air than is taken out. For a company, this usually requires deep cuts in direct emissions (Scope 1 and 2) and value-chain emissions (Scope 3), with residual emissions neutralized through permanent carbon removal.
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Source excerpts (5)
The NZFSPA is accredited by the UN Race to Zero campaign and is a member of the Glasgow Financial Alliance for Net Zero. Qontigo’s commitment to NZFSPA underscores its dedication to the net zero transition for both the company’s own business operations and in enabling
— Qontigo joins the Net Zero Financial Services Providers Alliance with a commi…
SUSTAINABILITY SOLUTIONS / CLIMATE SOLUTIONS Net Zero Solutions Make your Net Zero statements meaningful with a data-driven approach. Distinct methodology for defining Net Zero alignment Our Net Zero ali
Turning Net Zero Pledges Into Action Featured in the IPE Magazine supplement ‘Towards Net Zero’, November 1 issue. In the run-up to COP26, Net Zero pledges have becom
— Turning Net Zero Pledges Into Action | ISS
‘well below’ 2°C scenario, and help investors understand and address the financial risks and opportunities that loom ahead as the world moves towards net-zero targets. “Climate change is a systemic and urgent global challenge and also one that will significantly disrupt capital allocations and returns,” Cra
— STOXX Willis Towers Watson Climate Transition Indices: A comprehensive soluti…
Transparency Paves the Road to Net Zero MAY 17, 2022 - Transparency is the foundation of a successful Net Zero transition.
Net Zero Transition
▰▰▰ 48
The process by which a company, portfolio, or economy moves from its current emissions profile to a net-zero state, encompassing strategic planning, capital reallocation, technology adoption, and stakeholder engagement.
Note
net zero transition is the journey, while net zero is the destination. STOXX Climate Transition Benchmarks reward companies that demonstrate credible transition plans, even if they currently operate in high-emitting sectors.
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Source excerpts (5)
tant companies from high-emitting sectors that play a crucial role in the climate transition. Compliance with key regulatory guidelines The ISS STOXX Net Zero Transition indices are aligned with ESMA’s fund naming guidelines and comply with SFDR requirements. Key ISS STOXX Net Zero Transition indices Related news & re
— ISS STOXX Net Zero Transition indices | STOXX
Base Values and Dates: 100 on Mar 21, 2022. Index Types and Currencies: Price, Net and Gross return in EUR and USD. Dissemination Calendar: ISS STOXX Net Zero Transition Indices follow the below mentioned calendar: Index Name Calendar ISS STOXX World AC Net Zero Transition STOXX Global Calendar ISS STOXX Developed Wor
— Stoxx Index Guide (PDF), p. 276
Transparency Paves the Road to Net Zero MAY 17, 2022 - Transparency is the foundation of a successful Net Zero transition. Given heightened concerns about what has been described as ”the climate emergency,” transparency about where actors stand on climate issues is cruci
— Transparency Paves the Road to Net Zero | ISS
10/23 Monthly Index News / August 2025 Net Zero Transition indices Key points The ISS STOXX® Developed World Net Zero Transition added 2.7% in dollars last month. The ISS STOXX Net Zero Transition indices are a next-generation, optimized set focused on net-zero targets, real-wo
— Monthly Index News August 2025 (PDF), p. 12
Owner Alliance, which aimed to kickstart the design of new climate indices that can help support a true and just low-carbon transition. The ISS STOXX Net Zero Transition indices are aligned in spirit with both protocols. The work so far Since launching the Low Carbon and Climate Change indices series in 2016, STOXX ha
— New ISS STOXX net zero indices adopt innovative, forward-looking approach to …
P
Paris-Aligned Benchmark (PAB)
▰▰▰▰ 177
An investment benchmark that meets the requirements of the EU Benchmark Regulation for Paris alignment, including: (1) an initial 50% reduction in carbon intensity versus the investable universe, (2) a minimum 7% year-on-year self-decarbonization, (3) exclusion of companies deriving significant revenue from coal, oil, and gas, and (4) at least equivalent exposure to high-emitting sectors as the parent index.
Note
a PAB is a stock or bond index designed so that the companies it contains, taken together, are on track with the Paris Agreement’s 1.5 C goal. STOXX offers a family of PAB indices (e.g., STOXX Europe 600 Paris-Aligned Benchmark) built with ISS ESG climate data.
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Source excerpts (5)
Baden-Württemberg (LBBW). The new index is a decrement version of the iSTOXX® Global Climate Change ESG Index, itself based on the STOXX® Global 1800 Paris-Aligned Benchmark (PAB) and supplemented by additional ESG exclusionary screens. The STOXX PABs are constructed to follow the EU’s Paris-aligned benchmark (EU PAB) requireme
— Monthly Index News May 2022 (PDF), p. 4
Infrastructure Indices October 2022: Updates to section 14.16. November 2022: Methodology update to the STOXX Climate Transition Benchmark and STOXX Paris-Aligned Benchmark Indices November 2022(2): Rule clarification of selection lists during review month, free float factors rule clarification,country classification cri
— Stoxx Index Guide (PDF), p. 18
on regulatory initiatives, most recently with ESMA[1] guidelines requiring that any fund using ESG terminology in its name must, at a minimum, apply Paris-aligned benchmark exclusions. In practice, this means that every ESG-labelled investment must have a pronounced climate focus.
— Q&A with DWS’s Frederike Bauer: ‘Data evolution is fostering awareness in…
STOXX will use this Carbon Budget data in the weighing process of the STOXX Paris-Aligned Benchmark Indices and to ensure the indices are aligned with the IEA Sustainable Development Scenario (SDS) pathway until 2050. The ISS ESG scenario analysis c
— Istoxx Index Guide (PDF), p. 748
STOXX and ICE have teamed up to develop a suite of unique, optimized fixed income indices that comply with, and exceed, the European Union’s Paris-aligned Benchmark (EU PAB) and EU Climate Transition Benchmark (EU CTB) requirements. As such, the indices are designed to align investments with the Paris Agreement’s
Physical Risk
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Quote
“Physical climate risks are not hypothetical. Floods, droughts, and wildfires are already repricing real estate, insurance, and sovereign debt.”
— Network for Greening the Financial System (NGFS), Climate Scenarios for Central Banks (2020)
The financial risk arising from the physical effects of climate change, including acute events (hurricanes, wildfires, floods) and chronic shifts (sea-level rise, heat stress, water scarcity). ISS ESG scores assets and companies on their exposure and vulnerability to these hazards under different warming scenarios.
Note
physical risk is the danger that climate change will damage a company’s factories, disrupt its supply chain, or reduce demand for its products. A coastal real-estate portfolio, for example, faces high physical risk from sea-level rise.
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Our proprietary asset database provides verified geolocation and site-level intelligence to support precise identification of physical risk exposure of real assets owned or operated by issuers. Analyze emissions performance at the real asset and portfolio level.
— Climate and Nature Ongoing Innovation | ISS
Includes forward-looking returns-based analysis quantifying the potential financial impact of a net zero scenario. PHYSICAL RISK Provides estimates of financial impact due to increasing hazard intensity for the most likely and worst-case scenarios by 2050 across the five most c
For public equity and fixed income strategies, the report provides detailed analyses of Scope 1&2 and Scope 3 emissions, transitional and physical risks and alignment with below 2° C, 4° C and 6° C climate scenarios. The report can assist investors in fulfilling requirements for internal and global e
— Carbon & Climate Data and Advisory | ISS
A brief description and motivation for the different sustainable terms in the objective function is given below: 1) Physical Risk Score: Risk resulting from physical impacts of climate change. It is given by the average of Acute Physical risk and Chronic Physical risk as defined
— Istoxx Index Guide (PDF), p. 300
related risks based on these complimentary pillars. WATER RISK EXPOSURE CLASSIFICATION WATER RISK MANAGEMENT Determine Your Portfolio’s Water-Related Physical Risk Exposure Assess the water-related physical risk exposure and access information on company-specific geo-based water risks, measured by pairing inform
R
Science-Based Target
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A greenhouse gas emissions reduction target adopted by a company that is consistent with the level of decarbonization required to meet the goals of the Paris Agreement (1.5 C or well-below 2 C). Targets are validated by the Science Based Targets initiative (SBTi).
Note
a science-based target is a company’s climate pledge that has been checked against actual climate science. ISS ESG tracks whether companies have set, committed to, or validated science-based targets, and STOXX uses this information in index construction.
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’s 2°C scenario until 2050. Importantly, the STOXX Climate Benchmark Indices mandate science-based carbon-target setting using a phased approach. How science-based target setting affects the composition of STOXX’s climate benchmarks One of the requirements of the EU PAB methodology is to increase the weight of companie
— Science-Based Targets – A Key Piece in the Climate-Alignment Puzzle | Blog po…
Analysis of 50 of the best-rated equity funds under Climetrics’ new methodology found that two-thirds have above-average investment in companies with science-based targets.1 Setting a science-based target means that a company’s emissions reduction targets are aligned with climate science, i.e.
— European investment funds rated on alignment with 2°C Paris climate target | ISS
This is with the intention of incentivizing companies to commit and set science-based targets. ISS ESG’s Carbon Risk Rating data assesses companies’ capacity to manage future climate change related challenges and opportunities arising from th
— Stoxx Index Guide (PDF), p. 614
The indices are designed to exceed the requirements in the European Union Climate Benchmarks regulation and use science-based targets to encourage companies and investors to work towards global targets. Bocquet explained that the PABs were specifically designed so that they keep ex
— Taking Temperature for 2021: Panel Discusses Climate Action Among Investors |…
- by 2023, all companies in the index are committed to reducing their GHG emissions, and - by 2025, all companies in the index without SBTi approved science-based targets will have a target weight reduction of 80%. In more details: 1. Companies that have science-based targets approved and reported through the Science
Stranded Assets
▰ 1
Quote
“If we burn all proven fossil-fuel reserves, we blow the carbon budget. That means a large fraction of those reserves are stranded assets — unburnable carbon.”
— Mark Campanale, founder of Carbon Tracker Initiative
Assets that suffer unanticipated or premature write-downs, devaluations, or conversion to liabilities as a result of the transition to a low-carbon economy. Examples include proven fossil-fuel reserves that can never be extracted if carbon budgets are respected, and coal-fired power plants retired before the end of their economic life.
Note
stranded assets are investments that lose their value because climate policy, technology shifts, or changing demand make them uneconomic. An oil company sitting on vast reserves may find those reserves worthless under strict climate regulation.
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cy of their capital expenditure strategies with policymakers’ goals to limit greenhouse gas emissions, or a company’s strategy to address the risk of stranded assets presented by global climate change and associated demand reductions for oil and gas. The revisions to the current policy clarify the types of risks r
Sustainable Development Goals (SDGs)
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The 17 interconnected goals adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure prosperity for all by 2030. ISS ESG maps corporate activities and revenues to the SDGs, allowing investors to assess alignment.
Note
the SDGs are the world’s shared to-do list — from “No Poverty” (Goal 1) to “Climate Action” (Goal 13) to “Life Below Water” (Goal 14). Fund managers use SDG-alignment data from ISS ESG to build thematic sustainability portfolios.
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The SDI AOP consists of asset owners who invest in solutions which contribute to the UN Sustainable Development Goals. The SDI AOP is comprised of APG, AustralianSuper, British Columbia Investment Management Corporation (BCI) and PGGM.
— SDI AOP launches forward-looking dataset that assesses which companies are ac…
The Sustainable Development Investments Asset Owner Platform (SDI AOP), which helps investors imbed the UN’s Sustainable Development Goals (SDGs) into investment processes, has been expanded to include analysis of companies’ negative contributions to the goals.
— Turning negative into a positive: SDI AOP platform expands dataset to include…
STAINABLE INVESMENT METHODOLOGY 6/13 approach is therefore developed to account for positive contributions, such as those made to the United Nations’ Sustainable Development Goals (SDG)6, Specificity, so as to reflect the current recommendations in the SFDR as far as possible: • Specific metrics should be sought to account for
— Stoxx Sfdrarticle2 17 Sustainableinvestmentmethodology 202501 (PDF), p. 6
ity Indices Our biodiversity indices provide a framework to help address nature-related challenges. Stock selection is based on exclusionary screens, Sustainable Development Goals (SDGs) and carbon emissions targets. Engagement Solutions Our Engagement Solution allows participation in a joint outreach and dialogue with companies on ma
— Climate and Nature Solutions | ISS
Creating Shared Value (CSV) measures [A00709] If value is 1 then 1, else 0. 9. Sustainable Development Goals (SDGs): [A00719] If value is 1 then 0.34, else 0. [A01042] If value is 1 then 0.34, else 0. if the summation from [A01015] to [A01031] >9 then 0.34, else 0.
Temperature Alignment
▰ 1
A metric that assesses whether a company’s or portfolio’s emissions trajectory is consistent with a specific global warming limit (e.g., 1.5 C, 2 C). It synthesizes current emissions, reduction targets, and decarbonization pace into a single temperature score.
Note
temperature alignment is a thermometer for investments. If a portfolio’s temperature alignment is 2.5 C, it means the portfolio is overshooting the Paris Agreement and contributing to a warmer-than-safe world. ISS ESG provides company-level temperature scores used in STOXX climate benchmarks.
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Moreover, “different providers’ assessments vary widely even when they are expressed in similar units, as in the case of temperature alignment.” Implications for index design Finally, the whitepaper looks at key implications of climate measurement for index design and argues that there is a
— New Qontigo Study Looks into Expanding Landscape of Forward-looking Climate M…
Transition Metal
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In the context of sustainability investing, a metal critical to the clean-energy transition — such as lithium, cobalt, nickel, copper, and rare earth elements — used in batteries, electric vehicles, wind turbines, and solar panels. Demand for these metals is projected to surge under Net Zero scenarios.
Note
transition metals are the raw materials that make decarbonization possible. Without lithium for batteries or copper for electric wiring, the energy transition stalls. STOXX thematic indices track companies involved in mining, refining, or recycling these materials.
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Net-Zero by 2050 Roadmap, renewables may increase their share of power from 10% currently to 60% in three decades, exacerbating supply shortages for transition metals. STOXX’s energy transition metals thematic indices offer targeted exposure to key segments driving the transition metals boom — whether individual c
— Thematic indices: Capturing trends from AI to defense to transition metals | …
[5] The IEA expects lithium shipments from clean energy technologies to grow more than 40 times between 2020 and 2040, the fastest increase among all transition metals (Figure 1).[6] Figure 1: Growth in demand for selected minerals from clean energy technologies by scenario, 2040 relative to 2020 However, lithium d
— New iShares ETF tracking STOXX Global Lithium and Battery Producers index off…
n to electric transportation, allowing investors to gain exposure to a future chapter in the modern mobility megatrend. Positioned for growth: Energy transition metals Elsewhere, investors can also target the electric-car revolution via the high-growth sector of energy transition metals, through new and planned ind
— The future of mobility: thematic investing in the clean transport revolution …
That includes Paris-aligned benchmarks, clean energy and even indices tracking energy transition metals. In most of those cases, investors can now make use of measurements to tackle their goals that weren’t available only a few years ago.
— Q&A with STOXX’s Loeb: Improved datasets are helping design new investmen…
“And this innovation will not stop.” While all sectors exposed to the AI deployment — from utilities to transition metals to turbine manufacturers — have performed strongly this year, investors have primarily focused on the foundation of the AI tech stack: companies pro
— Europe defense, AI take center stage at Deutsche Börse’s ETF Forum event amid…
Transition Risk
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Quote
“Transition risk is the financial cost of the world doing the right thing on climate. Policy, technology, and market shifts will reprice every carbon-intensive asset.”
— TCFD, Final Report: Recommendations (2017)
Financial risk arising from the process of adjusting to a low-carbon economy, including policy and regulatory changes (carbon pricing, emissions caps), technological disruption (renewable energy cost declines), market shifts (changing consumer preferences), and reputational impacts.
Note
transition risk is the danger that climate policy and technology — rather than climate weather — will hurt a company’s bottom line. A carbon tax, for instance, directly raises costs for high-emitting firms. ISS ESG quantifies transition risk through carbon pricing scenarios, technology exposure analysis, and regulatory mapping.
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W Climate Transition Indices are a new approach to managing climate risk that offer investors a systematic and transparent way to incorporate climate transition risk into their investment decisions. The index methodology leverages WTW’s proprietary Climate Transition Value at Risk (CTVaR) data to assess the antici
— Holding the world in your portfolio and considering climate transition risks …
Counting molecules of carbon is the essential first step to tackling climate change, but it’s only the start. “When we started looking at transition risk, i.e., the impact that changes in policy, regulation, markets and consumer behavior would have on asset values, we found that there were serious shor
— Q&A with WTW’s David Nelson: Managing a portfolio’s climate transition ri…
I enables a more sophisticated way of managing climate risk, that looks beyond carbon emissions, by making a forward-looking, bottom-up evaluation of transition risk and opportunity for each company. A proprietary Climate Transition Value at Risk (CTVaR) measure analyses the impact on projected company cashflows o
— Willis Towers Watson and Qontigo launch pioneering STOXX Global Index Series …
Importantly, remaining emissions are from companies helping the world to transition. Figure 2: Transition risk analysis of CTI and benchmark In the words of Nelson, the CTIs turn the complex data of CTVaR into something investable through a simple indexation s
— WTW: Why it is key to manage a portfolio’s climate-transition risk beyond car…
The other two are physical risk and liability risk. The relevance of climate transition risk means that “we are not going to come anywhere near meeting our climate goals just by decarbonizing our supply chains and buying offsets,” said David.
— STOXX WTW Climate Transition Indices: Replacing decarbonized portfolios with …
W
Water Risk
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The probability that water-related challenges — including scarcity, flooding, pollution, and regulatory restrictions — will materially affect a company’s operations, supply chain, or financial performance.
Note
water risk captures the business consequences of having too little water (drought), too much (floods), or water that is too dirty to use. ISS ESG assesses water risk at the facility level, mapping company sites against hydrological basin data.
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SUSTAINABILITY SOLUTIONS / RATINGS & RANKINGS Water Risk Rating Access a holistic assessment of companies’ exposure to freshwater-related risks. Water Risk Rating helps you mitigate freshwater-related risks
The WRR runs on a scale from 0 to 100, with higher values indicating lower risk. Figure 6: ISS ESG Water Risk Rating Regarding water risk, the industry diversification of the GRANOLAS paints a mixed picture.
— Europe’s ‘GRANOLAS’ stocks: A sustainability and climate perspective | Blog p…
their investment portfolios. ISS ESG FRESHWATER INDEX SERIES Identify companies with low or negligible freshwater-related risks based on the ISS ESG Water Risk Rating, which considers companies’ Water Risk Exposure and Water Risk Management.
community discourse, the implications of regulatory action on this space are less often considered by investors. In this topic, ISS ESG research into water risk management identifies those sectors most exposed, and suggests potential corporate and investor actions. - TOPIC 4: Buy Now Pay Later (BNPL) companie
— ISS ESG White Paper Series: ESG Themes and Trends 2021 – Australia & New …
investments in a number of sectors, as highlighted by the recent announcement of the Ceres-backed Valuing Water Finance Initiative. - When looking at water risks in their portfolios, investors are able to consider both the risk to an investee’s business and the risks to water supplies arising from the busines
— Freshwater & Finance: Investor Action in the Face of a Global Crisis | ISS
Water Stress
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A condition in which the demand for water in a given region exceeds the available supply during a certain period, or when poor water quality restricts its use. Water stress is typically measured as the ratio of total water withdrawals to available renewable surface and groundwater supplies.
Note
water stress means a region is using more water than nature can replenish. Companies with operations in water-stressed areas face higher costs, production disruptions, and regulatory constraints. ISS ESG flags facilities located in high water-stress basins.
A ratio above 0.4 (40%) is generally classified as “high water stress.”
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ss information on company-specific geo-based water risks, measured by pairing information on a company’s geographical footprint with data on baseline water stress from the World Resource Institute Aqueduct Water Risk Atlas. CONTRIBUTE TO THE UN SUSTAINABLE DEVELOPMENT GOAL 6: Clean Water & Sanitation Flag compa
For example, deforested land rapidly degrades due to factors such as low soil fertility and water stress, leading to more land being deforested to replace land that is no longer usable for agriculture.
— NCRI Deforestation Report | ISS
to increase fossil fuel development and production may impact climate targets, and may pose legal and reputational risks; ▪ Data centers exacerbating water stress, especially in drought-prone areas; ▪ Child safety; ▪ End use due diligence (how use of AI for surveillance and censorship, especially in conflict-af
— Sustainability Us Voting Guidelines (PDF), p. 72
treat wastewater. Figure 4 shows the top 10 of a total of 59 constituents in the index. Figure 4: Index top 10 holdings Securing the future of water Water stress poses a serious threat to human health and development, and to economic growth, in what has been called “potentially the most complex and costly sust
— New Deka ETF tracking STOXX index targets leading water innovators | Blog pos…
to increase fossil fuel development and production may impact climate targets, and may pose legal and reputational risks; Data centers exacerbating water stress, especially in drought-prone areas; Child safety; End use due diligence (how use of AI for surveillance and censorship, especially in conflict-af
Weighted Average Carbon Intensity (WACI)
▰ 4
A portfolio-level metric recommended by the TCFD that measures carbon intensity weighted by each holding’s share of the portfolio. Unlike carbon footprint, WACI does not require knowledge of enterprise value; it uses portfolio weights and revenue-normalized emissions.
Note
WACI tells you how carbon-heavy a portfolio is on average, accounting for how much money is allocated to each company. It is the most widely used metric for comparing the climate performance of investment portfolios and is central to STOXX climate benchmark construction.
where is the portfolio weight of company .
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Using user-provided data, the model estimates Scope 1, 2, and 3 emissions, including Emissions Exposure and Weighted Average Carbon Intensity to assess carbon impact. When valuation data is available, financed emissions are calculated, offering deeper insights into climate impact. Our forwa
— Climate and Nature Ongoing Innovation | ISS
e (UNFCCC)), aligned with the PCAF methodology - Scope 1, LULUCF emissions and relevant emissions intensities of sub-sovereigns - Includes the TCFD’s weighted average carbon intensity by scope. Transition Risk and Climate Policy Ratification, including data on sovereign energy mix and fossil fuel dependency and reserves. - Alignmen
ly 8% in 2022 and will exceed it by more than 400% by 2050 due to higher exposure to conventional sources of electricity than the SDS scenario. - The weighted average carbon intensity of the Russell 3000 increased by 9.4% after the June 2022 rebalancing, jumping from more than 140 tCO2e/$mn of revenue in 1Q22 to more than 153 tCO2e
— Implications of Index Reconstitutions: Free Carbon Alpha? | ISS
Maintenance Note
This glossary is a living document. Terms should be updated as ISS ESG and STOXX release new methodologies and as regulatory frameworks (EU Taxonomy, CSRD, TNFD) evolve. Last reviewed: 2026-03-28.