The Bombay Stock Exchange will launch a new index, BSE Greenex, on Wednesday. The index which will track companies which are friendly to the environment based on a methodology developed by IIM-Ahmedabad, will be launched by corporate affairs minister Veerappa Moily at BSE’s convention hall in Mumbai.

It is a first-of-its-kind benchmark index, which will assess the ‘carbon performance’ of stocks based on purely quantitative performance-based criteria. Unlike existing global indices that measure environmental performance through various scaled quantitative criteria, the BSE Greenex applies sector-specific proprietary algorithms, developed in cutting-edge research facilities, to assess energy efficiency performance of various companies based on publically disclosed energy and financial data.

The BSE Greenex is the first step in creating an inclusive market-based mechanism for the promotion of energy efficient practices amongst the larger business entities in India. The Bombay Stock Exchange in close association with Gtrade Carbon Ex Ratings Services Private Limited (gTrade) has co-developed the BSE Greenex.

The mission of gTrade is to create viable market based solutions for industries, investors and governments, to promote energy efficient practices and encourage impact investing in economically and environmentally sustainable businesses. It seeks to achieve its mission by developing and promoting a “green ethos” in high growth developing nations through market-based push and pull factors by providing financial tools to investors. The BSE Greenex is the outcome of the joint collaboration which consists of some of the largest and most efficient companies on the carbon emissions front from the BSE-100 Index.

One of the parameters for measurement of efficiency performance used in BSE Greenex calculation, and received from gTrade, is emissions intensity viz. total emissions upon total revenue (which is assumed to be a close proxy for energy efficiency). Mandatory disclosures on energy usage by assessed companies make it possible to estimate these numbers for listed companies.

Additionally, BSE Greenex is the first equity index to be publicly disseminated on a real-time basis, providing a new tool for use by “green” retail and institutional investors to track the performance of India’s largest and most liquid, energy efficient stocks. The index can be licensed for the development of green financial products including mutual funds, ETFs and structured products.

BSE Greenex is also India’s first objective green equity index to employ index constituent weight capping. Index constituent weights are capped at 6 percent during dynamic rebalancing, in an effort to increase the diversification within the index and ensure greater compliance with international regulatory and statutory investment guidelines.