Researchers develop first-of-its-kind financial tool to hold powerful companies accountable: 'A game-changer'

In an attempt to drive investments away from dirty energy, researchers at the University of Cambridge have teamed up with Bloomberg to find a solution. The result? The first global bond index that targets the expansion of dirty energy industries.

According to a report by Open Access Government, a group of researchers from the university has partnered with Bloomberg Index Services Limited "in a significant move aimed at leveraging financial markets for climate action."

With a bond index, companies are more incentivized to take climate actions that have a meaningful impact. Currently, many large corporations take advantage of greenwashing tactics to shelter their investments in dirty energy.

However, thanks to research by Dr. Ellen Quigley, experts are understanding the importance of and need for "evidence-based climate impact by institutional investors."

University of Cambridge Chief Financial Officer Anthony Odgers highlighted the significance of the new project. "The index is a game-changer for the growing number of asset owners who invest in corporate debt and understand its impact on fossil fuel expansion," per the university.

What makes the project unique is its "rules-based engagement" approach that evaluates companies based on their direct involvement in new initiatives that rely on dirty energy. As a result, this model influences large corporations to make eco-friendly changes.

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"For instance, a company classified as a fossil fuel producer could be included in the index if it demonstrably ceases expansion activities and aligns with a credible phase-down pathway," per Open Access Government.

As more projects roll out, such as the global bond index, companies will be incentivized to transition away from dirty energy and toward clean energy. While clean energy is not perfect, it offers both financial and environmental benefits for companies looking to make the switch. By reducing the total amount of harmful pollutants entering the atmosphere, companies can help combat rising global temperatures.

With clean energy becoming more affordable, companies that solely use dirty energy are becoming a liability for investors. Moving forward, companies can transition toward clean power to not only reduce their environmental footprint but also offer long-term growth for investors.

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