The Bombay Stock Exchange (BSE) will on Wednesday launch a new index called 'BSE-GREENEX' measuring the performance of companies in terms of carbon emissions, an official of IIM, which co-developed the model, said.
The index, developed by the BSE in collaboration with the premier B-school Indian Institute of Management, Ahmedabad (IIM-A), will enable investors take more informed investment decisions about companies in the energy-intensive sectors, among others.
"A model has been created in collaboration with the BSE, where BSE-100 companies were evaluated on the basis of greenhouse emissions in the last four financial years from 2007-08 till 2010-11," Project Coordinator at IIM-A Amit Garg said.
"The companies were tested in different combinations of carbon emission intensity, market capitalisation, and turnover," he said, adding that the index will have fair representation of firms from virtually all the sectors.
The top-ranking companies from each sector like power, steel, cement have made it to the new index called BSE-GREENEX currently comprising less than 30 companies, Garg said.
"During the dry runs, the BSE-GREENEX has performed better than the Sensex," he said.
As part of this joint venture project, IIM-A evaluated the firms on carbon side based on the information put by them in the public domain (annual reports), while the BSE's main role was to detail on financial side of these companies and provide technical back-up for it.
Like the best performing stocks of companies make it to the Sensex-30 and the existing ones have to exit for non-performance, BSE-GREENEX, too, will witness firms coming and going, Garg said.
The concept is all about screening companies doing good on the carbon side, as the concerns for climate change is growing among the stakeholders.
Incidentally, IIM-A in June 2011 had launched India's first Eco-Label 'The Green Signal', certifying environmental preferences adopted during the manufacturing of a product or services offered by an entity, to give push for the industry and service sector to go green.
The broader parameters taken for assessing a product or service was on energy consumption, carbon footprints, water consumption, waste generation and management, other pollutants and CSR commitments, of the entity.
Eco-labelling, a concept prevalent in developed countries, is a voluntary method of environment performance certification and labelling products similar on lines of Bureau of Energy Efficiency's (BEE's) energy star rating and certain organic food certifications.