JPMorgan tilts bond index for climate change

JPMorgan and Innovest earlier this week launched what they are calling a "green" bond index meant to put a number on the financial factors stemming from global warming.

The JPMorgan Environmental Index-Carbon Beta (JENI-Carbon Beta) is designed to evaluate the risks and potential business opportunities posed by global warming to U.S. corporations.

Each month, Innovest, financial research firm specializing in sustainability and environmental business issues, will calculate a relative carbon beta score for corporate bond issuers. Carbon dioxide is a greenhouse gas, the build-up of which causes global warming, according to scientists.

"Until today, bond prices did not reflect an increasingly important financial risk: climate change," said Edward Marrinan, managing director and head of investment grade credit strategy, in a statement. "With climate exposures factored in, companies' risk profiles--and their bonds--will more accurately reflect the trade-off between risk and return."

The JENI Carbon Beta is based on the existing JPMorgan US Liquid Index (JULI), a benchmark for U.S. corporations. JPMorgan and Innovest back-tested the carbon beta and found that it closely tracks the characteristics of the JULI while factoring in global warming-related financial risks.

JPMorgan is hardly the first mainstream financial advisor to seek ways to quantify how climate change affects businesses.

Clean tech consultant Joel Makower earlier this week compiled a list of recent financial reports addressing global warming and climate change.