ABC of Carbon Weekly Blog - J is for JENI

The JPMorgan Environmental Index - JENI (or JENI Carbon Beta in full) - is the first high-grade corporate bond index designed to address the risks of climate change in a rigorous way. A collaboration between JPMorgan and Innovest Strategic Investment Advisors, a world leader in providing environmental analysis to institutional investors, JENI-Carbon Beta is designed to enable credit investors to make return- driven investment decisions that systematically take the risks and opportunities created by global warning into account. The index covers all industry sectors and is based on the JPMorgran US Liquid Index (JULI), an established benchmark for the US investment-grade corporate bond market. A relative carbon beta score, reflecting relative positioning to either benefit from or be burdened by costs relating to climate change, is calculated monthly for each issuer by Innovest. JULI is then 'tilted' according to the carbon beta scores of issuers to create the JENI-Carbon Beta. For example, the JENI-Carbon Beta might be underweighting an issuer for which reduction of carbon emissions will be especially costly, relative to its sector, while overweighting an issuer that appears to have unusual revenue potential in a carbon-constrained environment. Back-testing confirms that the JENI-Cabon Beta, while reducing investor exposure to the financial risks arising from climate change.